Fresh alert on tax deals: [1 Edition]
Stapleton, John. The Australian [Canberra, A.C.T] 29 June 2001: 36.
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Abstract
Last year the ATO declared that the pre-1998 schemes, which involved borrowing money to create tax deductions, were illegal. Investors were hit with tax assessments of up to $100,000.
Investors told a Senate inquiry they had been convinced to proceed because product rulings by the ATO and the corporate watchdog, the Australian Securities and Investment Commission, had “ticked off” on the prospectuses, which often were accompanied by advice from top tax barristers saying the schemes were legal.
The Senate Economics References Committee interim report into mass-marketed tax schemes tabled this week said the crisis over the schemes could have been avoided if the ATO had made an official ruling on their legitimacy much earlier.
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RURAL
INVESTORS in agricultural and forestry tax-minimisation schemes should exercise extreme caution as the tax year ends, an industry expert said this week.
Agribusiness Research’s managing director, Shane Kelly, said investors could end up losing far more than saved.
“Investors should not let the need to reduce tax cloud their judgment,” he said.
“Making an investment at the end of the year should require the same consideration as at any other time. It should be a time for cool heads making balanced decisions. The reason for investing in a specific scheme or schemes should always be a commercial one.”
The warning follows the release earlier this week of a Senate committee report that slammed the Tax Office for failing to give the public clear guidance on thelegality of the controversial schemes.
Mass-marketed tax-minimisation schemes involving agriculture have been a highly emotional issue in the past few months, with some politicians condemning the behaviour of the Australian Tax Office amid allegations of suicides and marriage breakups.
More than 65,000 people were involved in 300 schemes which included olive, timber and tea-tree farms as well as cattle- breeding programs involving $5 billion in tax deductions.
Last year the ATO declared that the pre-1998 schemes, which involved borrowing money to create tax deductions, were illegal. Investors were hit with tax assessments of up to $100,000.
Investors told a Senate inquiry they had been convinced to proceed because product rulings by the ATO and the corporate watchdog, the Australian Securities and Investment Commission, had “ticked off” on the prospectuses, which often were accompanied by advice from top tax barristers saying the schemes were legal.
The scandal has led to some scathing media coverage, with headlines such as: “Avoid tax now, face ruin later”.
The Senate Economics References Committee interim report into mass-marketed tax schemes tabled this week said the crisis over the schemes could have been avoided if the ATO had made an official ruling on their legitimacy much earlier.
The committee questioned the ATO’s right to impose interest and high penalty charges on taxpayers when it had failed to state its official position on theschemes until 1998.
Committee chairman Shayne Murphy said the ATO should have been alert to the growing risk to revenue that the schemes posed.
A temporary reprieve has been granted to people involved in the schemes while several test cases work their way through the courts. Insiders say at least half a dozen class actions are being discussed.
Mr Kelly said reduced inves tor confidence had seen the listed price of some forestry companies fall dramatically. Many were expecting lower profits for theyear and reduced future earnings potential.
“We have also noticed that new entrants to the market have been hit hard, particularly those promoters without access to strong financial planning and accounting distribution networks,” Mr Kelly said.
Agribusiness Research suggests that some promoters are offering schemes purely because of the commissions paid, with some promoters pocketing up to 20 per cent of capital raised.
The firm recommends that investors seek projects operating in established agricultural industries, with strong management teams, solid past performance and an expert independent assessment.