ATO Deputy Commissioner, Tim Dyce, on Thur 22.5.2014, delivered a speech on the ATO’s administration of the promoter penalties regime and recent court decisions at the Tax Institute’s 7th Annual Tax Forum. Mr Dyce said the ATO’s approach to promoter risks is to act quickly to stop the proliferation of potential tax avoidance and tax evasion schemes and to disrupt the supply and demand for these products. He said applications to courts for the imposition of civil penalties were a last resort in ensuring compliance. Mr Dyce said most entities contacted by the ATO on promoter penalty matters act quickly to self-correct and to limit reputational damage to their business as well as damage to their clients/customers, with some electing to pay tax-related liabilities arising from arrangements on behalf of taxpayers.
Mr Dyce said some professionals have questioned aspects of the ATO’s information gathering approach, including the stage at which section 264 notices are issued and the implication that promoter penalty issues exist when a section 353-10 notice is issued. Mr Dyce said the ATO was mindful of the potential reputational issues associated with the promoter penalty laws, but said the ATO considered this unavoidable given that section 353-10 notices by their very nature relate to these laws.
Mr Dyce also discussed recent court cases concerning the promoter penalty regime. This included the Federal Court’s decision in FCT v Barossa Vines Limited & Ors [2014] FCA 20, which imposed civil penalties on the responsible entity of a viticultural managed investment scheme (MIS) as well as its directors and a director of an associated entity. Mr Dyce said the case was the first in which the Commissioner was successful in applying to the Federal Court for the imposition of penalties against an entity for implementing a scheme, which had been promoted on the basis of conformance with a product ruling, but in a way that was materially different from the scheme described in that ruling.
In relation to further cases before the courts, Mr Dyce said the ATO currently has 1 cluster of promoter penalty cases involving different taxpayers in the Federal Court, and another cluster is being considered for possible application to the Court.
[LTN 97, 22/5/14]