International Family Business Blog

Australian Tax Office's new Trust Taskforce

The recent Budget allocated AU$67.9m for the ATO to chase up dodgy trust arrangements.

The characteristics that the ATO will be concentrating on include: artificiality; mischaracterisation of transactions; offshore dealings; sham-like arrangements; and uncommercial agreements. The ATO will liaise with other government instrumentalities under the Project Wickenby protocols.

Known or suspected "promoters" and their clients will be particularly targeted. Unfortunately, many of these promoters lack sophisticated tax and associated legal understanding. In this connection, most of the offshore "tax planning" uncovered by Project Wickenby and dealt with by the courts, has actually been quite primitive.

"Tax planning" that requires secrecy to succeed has always been problematic. If arrangements cannot withstand the light-of-day, they are increasingly likely to be discovered and be treated as evasion (i.e., criminal).

The ATO have advised that taxpayers "…unsure about the full implications of tax planning that you are connected to or are contemplating, seek independent advice or a binding private ruling".

All-in-all, that is good advice. However, seeking (qualified and experienced) independent advice as a first step might be  the most sensible move. If your arrangements are borderline criminal (or worse), a second opinion from an experienced specialist adviser may involve them working with an equally specialist lawyer to best protect your interests.

The ATO and its Project Wickenby partners have access to multiple deep information resources. Information sharing between international revenue and law enforcement authorities has never been as extensive and well organised as it is now.

An average of AU$17m each year will allow the ATO to establish a crack team, including outside accounting and law consultants. If they do it properly, this will be a powerful group. 

And remember, the new Commissioner is a highly experience former tax practitioner. He will bring a more sophisticated understanding and approach to oversight of this task.

Caveat emptor!

RBA's nominal rate cut

The RBA's nominal 0.25% rate cut is unlikely to have any substantive impact on either the home construction industry or the inflated value of the AU$.

Market and public psychology needs at least a 0.5% cut for the 'message' to be received. 

April official rates were: US 0.13%; Japan 0.10%; UK 0.50%; Europe 0.75%; and Canada 1.00%. 

How many of those central Banks will stop buying AU$ that earn 2.75%? The AU$ is already trending back to US$1.02!

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