International Family Business Blog

NSW Supreme Court decides new trustee in Hope Margaret Hancock Trust saga

Photo - (AAP: David Moir)

In this long running case against multi-billionaire Gina Rinehart by her children, Justice Brereton today "...appointed Ms Bianca Rinehart trustee of the Hope Margaret Hancock Trust in place of her mother Mrs Gina Rinehart, and ordered that Mrs Rinehart deliver up the trust documents and account to the new trustee." Bianca Rinehart is Gina's eldest daughter.

The Hope Margaret Hancock Trust was established by Gina's father for the benefit of her four children (his grandchildren). The deed appointed Gina as sole trustee and she maintained a tight control over the trust and its income. Three of the four adult children claimed that Gina had, inter-alia, managed the trust in a manner inconsistent with the obligations and responsibilities of a trustee.

It is said that the assets of the trust are valued circa A$4 billion. However, it is unclear whether the decision will free-up a cash windfall for the beneficiaries because investment decisions made by Gina during her trusteeship may effectively limit the flow of cash into the trust.

The dispute over the trust and its control has split the family and several of the children appear to have suffered financial hardship and disruption to their personal relationships.

See Judgement Summary:

Premium Investor Visa - Further Details

The Australian Government hasprovided some additional details about the new Premium Investor Visa (PIV) that is mooted to be introduced on 1 July 2015 and will supplement the existing $5 million Significant Investor Visa (SIV).

The Government has indicated that the visa will target “ ..talented entrepreneurs and innovators. The PIV will offer a more expeditious, 12 month pathway to permanent residency than the SIV, for those meeting a $15 million threshold. The PIV will be available at the invitation of the Australian Government only, (emphasis added)with potential recipients to be nominated by Austrade. This programme will be rolled out over the next year, focussing on attracting a small number of highly talented and entrepreneurial individuals.  States and Territories will play an important role in helping to identify potential applicants.”

It is expected the rules for both the SIV and PIV will close a loophole that allowed applicants to borrow against the qualifying investments they made in Australia and either repatriated the funds or diverted them to tax haven centres.

Australian Budget moots clarification of anti-avoidance rules to target BEPS

Australia’s Treasurer Joey Hockey has announced a proposal to amend the Part IVA general anti-avoidance provisions in an effort to ensure it applies to the 30 biggest multi-nationals operating in the country. The major concern is the use of strategies that ostensibly allow big organisations to structure their onshore operations as branches that escape the ‘permanent establishment’ rules. 

Australia to get Serious Financial Crime Taskforce

Australia's Treasurer Joe Hockey today announced a new permanent body to be called the Serious Financial Crime Taskforce (SFCT) would replace the existing multi-agency Project Wickenby offshore tax evasion task force.

The new SFCT will undertake "...investigations and prosecutions that will address superannuation and investment fraud, identity crime and tax evasion". The Government has committed A$127.6 million for SFCT operations for the 2015-2019 fiscal years. It will include "...the Australian Taxation Office, Australian Crime Commission, Australian Federal Police, Attorney-General's Department, Australian Transaction Reports and Analysis Centre, Commonwealth Director of Prosecutions and Australian Customs and Border Protection Services".

Although no specific inquiry powers have yet been mooted for the SFCT, the Australian Taxation Office and Australian Crime Commission already have extensive inquisitorial powers that over-ride common law privileges against self-incrimination. Together, these agencies also benefit from a wide range of information gathering capabilities including Australia's extensive international information sharing agreement network.

It is noteworthy that in his announcement, the Treasurer specifically stated, "This type of crime poses a genuine threat to national security". This comment raises the prospect of the task force possibly having access to the resources of Australia's various security agencies (Australian Security Intelligence Organisation, Australian Secret Intelligence Service and Australian Signals Directorate).

International advisors dealing with financial transactions (including tax planning) involving Australian individuals and entities will certainly need to be very aware of their "know your client" obligations. The establishment of the SFCT 'ups the ante' on ensuring that all financial and tax planning should be able to withstand close judicial scrutiny. Having top-level multi-disciplinary advisory teams in place would now seem to be essential.

Project Wickenby Tax Evasion Taskforce to be permanent?

Sid Maher of the Australian Newspaper reports (28 April 2015) that the Australian Government “...plans to permanently extend the powers behind the controversial Project Wickenby”. 

Project Wickenby is an investigatory taskforce of eight government agencies (including the Australian Taxation Office, National Crime Commission and Australian Federal Police) that has focused on arrangements considered to involve offshore tax evasion utilising what are referred to as “secrecy havens”. 

The Project has already been running for almost 9 years, raising approximately A$2 billion in additional tax liabilities, at a cost of approximately A$0.5 billion. So far, 74 people have been charged with criminal offences and Australian courts have convicted 44 (some have received severe goal terms, including for ‘money laundering').

It is understood that a large proportion of the evasion schemes targeted by Wickenby were administered and/or promoted by particular firms in the Channel Islands and Vanuatu, respectively. Such information as is available about the structure of the schemes indicates that the ‘planning’ involved was somewhat simplistic and may have relied primarily upon non-disclosure.

In the digital age, non-disclosure is not a viable alternative because governments can readily follow the money trail left when people seek to access funds ‘sheltered’ by such schemes. The Project Wickenby taskforce includes the resources of the Government’s Australian Transaction Reports and Analysis Centre (AUSTRAC), an anti-money laundering and special financial intelligence unit.

Genuine international tax and estate planning requires sophistication and probity. The client (and their advisors) need to be comfortable sitting in a courtroom and stating, “...yes, this is the way the arrangement is structured and this is why it is legitimate”.

There is no such thing as a cheap and simple international tax shelter. If a proposal looks too good to be true, it generally is!

Dodgy tax advice can get you in trouble!

We are getting closer to tax time in Australia. This means it is also the time for the purveyors of dodgy tax schemes to come out and play.

The primary anti-avoidance called Part IVA of the Income Tax Assessment Act 1936 was introduced in 1981 to counter tax schemes that were said to be artificial or contrived. However, the provisions originally legislated were actually much wider than that and they have also been tightened over several amendment cycles over the subsequent 34 years.

Part IVA’s reach has been better defined over more recent decades by various Federal and High Court decisions regarding the true ambit of the provisions. It is a very powerful weapon in the Tax Commissioner’s arsenal for the fight against tax avoidance. 

Moreover, the Crimes (Taxation Offences) Act 1980 and subsequent amendments to Part III of the Taxation Administration Act 1953 to incorporate a range of prosecutable tax crimes and quasi-crimes, have provided even more powerful weopons for the fight against tax evasion.

To help you avoid the quicksand, the Australian Taxation Office has just released a short video titled "Tax Tricks That Will Get You In Trouble”. You can view it here-

You might also like to watch the Tax Office "If it seems too good to be true, get a second opinion” video here-

Remember, getting it wrong can land you in goal!

Become an Australian Tax Office “Tax Help Volunteer"

Take a leap forward into a tax career! If you are a student who has passed tax law with a good grade, you may be interested in this opportunity. The Australian Tax Office trains volunteers each year to assist people with simple tax matters during tax return season. 

This is a great opportunity for students to get some practical tax return preparation and advice experience. Over the years, quite a number of my better students have done the program. It provides an excellent addition to your CV and has helped some of my former students get entry into first and second tier accounting firm summer intern programs.

This is the link to the Tax Office information page-

Tax Schemes - Get a second opinion!

The Australian Taxation Office (ATO) keeps a close eye on the proliferation of “too good to be true” tax avoidance schemes. Not only are there likely to be ‘flags’ raised in relation to deduction claims made in your tax return, online intelligence gathering and ‘dob-ins’ make it highly likely such arrangements will be audited.

If you are offered the ‘opportunity’ to invest in an investment scheme that is highly geared or otherwise driven by a ‘favourable tax effect’, seek a second opinion!

The ATO’s Youtube video Recognising tax avoidance schemes is a ‘must watch’!

We just got our Australian income tax assessments and are really cranky!

My wife and I are a typical middle class Australian couple, both work and don’t get any so-called ‘middle class welfare’. We have private medical cover, so are actually further subsidising public hospitals.

Our 2014 tax assessments arrived yesterday, together with a helpful full-colour explanation of what our taxes actually pay for. Much of it is fair enough, but some big items really tick us off!

The biggest slice (37%) goes to welfare. Disability and unemployment benefits chew up 10% of our taxes. I don’t mind helping out those in need, but since 96% of Australia’s jihadist foreign fighters were apparently on welfare before they took off - I am really very angry. 

Listen here! If you are fit enough to fight, you were fit enough to work! 

It is imperative that the government urgently investigates how these bludgers were allowed to get away with this - their families should be investigated to see if they are also welfare drones. Any doctors who are found complicit in the false certification of disabilities should have their licences to practice immediately revoked. Their patient lists should be scoured to identify other scammers.

Our welfare system needs urgent overhaul and a clawback of previous improper welfare payments should be urgently implemented.

Also, 4% of our taxes have been allocated to paying the interest on Labor’s debt burden. That proportion will only widen whilst ever parliament phaffs about with it’s current 'magic pudding’ fantasy that there is no budget problem. 

Enough already! Eventually, us dumb taxpayers have to repay it all - wasting OUR MONEY on bludgers and hangers-on ain’t going to help!

Tax issues for trustees of Australian trusts with Israeli beneficiaries

Many Australians of Jewish descent will have established family trusts. It is likely that in some cases beneficiaries of those trusts will now be living in Israel.

In 2013 the Knesset brought in a new law that changed the rules for the taxation of income entitlements of Israeli resident beneficiaries of foreign trusts. Tax is now due whether or not those entitlements were paid, retained in the trust, or satisfied “in kind”.

The changes to the law apply as from 1 January 2014 and trustees of such trusts have reporting obligations to the Israel Tax Authority. 

The rules are somewhat complex, but this plain language article by Chaim Wigoda provides a useful guide -

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