Tax Shelter Investors Get Concession From Australian Taxation Office

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

24 July 2001

The Australian Taxation Office (ATO) has announced that the vast majority of investors in mass marketed schemes across Australia will be eligible for a substantial cut in interest on their scheme-related tax debt under new guidelines released this week.

According to the new rules, eligible investors will be entitled to a reduction in interest from the current full interest rate of 11.89 per cent to 4.72 per cent. Tax Commissioner, Michael Carmody, explained: 'This decision seeks to strike a balance between protecting Australia's tax system and the need to deal fairly with those caught by the marketing of these schemes.'

He added that the Tax Office will reduce the interest for most schemes in recognition that many have circumstances that warrant an interest reduction. 'Many investors lacked full knowledge of the schemes and how the tax system works. They also relied on advice from people who they thought had the necessary knowledge. And of course many of these schemes were marketed in a very aggressive manner to people who otherwise had generally good tax records. In the end many investors appear to have suffered a real financial loss,' said Mr Carmody.

While most investors are expected to be eligible for the lower interest rate, some are excluded such as scheme promoters, tax advisers and financial planners. Mr Carmody commented that it was 'difficult to see how these people, particularly those who were paid for designing, managing, or marketing these schemes, would warrant a reduction in interest. These investors should have been well aware of the tax issues associated with their investment and how the self-assessment system works.'

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