ATO Criticised For Not Disallowing Low Tax Schemes Sooner

by Mary Swire, Tax-news.com, Hong Kong

20 June 2001

The Australian Taxation Office has admitted that the thousands of Australians hit with mammoth tax bills following its recent disallowal of 'tax effective' investment schemes would have been better off had the ATO acted sooner. Speaking on ABC's Four Corners programme recently, the Commissioner of Taxation, Michael Carmody confessed: 'We can always say that we could have acted earlier. It would have been better for people.'

The tax office reportedly took four years to rule against the schemes, effectively allowing participants to accumulate huge tax deductions, only to be hit with equally large tax bills when the ATO disallowed them. The office, which recently caused outrage when it was revealed that investors were being asked to forfeit their rights under the Freedom of Information Act in return for the settlement of long running taxation disputes, said that it was currently auditing several investment schemes, and denying deductions.

Four Corners estimated that over 40,000 people had received amended assessments challenging approximately $3 billion of tax deductions so far, and predicted that another 20,000 participants would be receiving their bills soon. A paper thin silver lining is barely visible- in April the Commissioner announced that the interest rate charged on late tax payments would be reduced from the standard 13.86% to 5.86%. Which must have been a huge comfort to the stricken investors.

Mr Carmody defended the private binding rulings given to five people which allowed an early version of one of the schemes, stating that the rulings only applied to the people who received them, and were based on the evidence available at the time. However, in retrospect, he said: 'We don't believe necessarily we got all the facts.'

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