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ATO Steps Up Scrutiny Of Offshore Tax Avoidance Schemes

by Mary Swire,, Hong Kong

27 December 2005

Despite the Australian authorities' ongoing enforcement campaign to counter offshore tax evasion, Acting Tax Commissioner Michael D’Ascenzo has stated that tax avoidance structures in other countries continue to be used by Australians to avoid tax.

According to Mr D’Ascenzo, who issued four new 'taxpayer alerts' last week, the Tax Office’s ongoing work in this area shows that some people are still using inbound and outbound transactions with offshore structures to avoid Australian tax.

“We are continuing to see people using tax havens, low tax jurisdiction or bank secrecy countries to conceal ownership of assets and income, or to generate fictitious or inflated deductions,” Mr D’Ascenzo explained.

“There are serious consequences for those who use other countries to avoid Australian tax and those involved can expect firm action from the Tax Office," he added.

The Tax Office is investigating arrangements such as: invoicing arrangements involving an offshore structure to obtain or provide goods or services to inflate deductions or defer income, and transfers of assets to an offshore structure either for ongoing use or sale of the asset to avoid capital gains tax.

According to the ATO, some taxpayers use the arrangements to return money to Australia for their private use, and the Tax Office says that it has seen instances of fictitious gifts from non-existent overseas relatives.

“People should be cautious about entering into these types of arrangements," noted Mr D’Ascenzo

The ATO is encouraging taxpayers to take advantage of penalty discounts offered under Australian law for those making a full and true voluntary disclosure.

Voluntary disclosure includes the provision of known details of the promoter who designed, sold or implemented the arrangements, and known details of the methodology employed.

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