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The Tax Office warns over Income-Splitting schemes

April 10, 2011  |   Posted by :   |   News   |   0 Comment»

Michael D’AscenzoThe Australian Tax Office (ATO) has issued a taxpayer alert warning people to be cautious when entering into an arrangement with a firm that includes steps to split their income with an associate, usually their spouse, by using a discretionary trust. “I’m concerned that people involved in this arrangement may be unaware of the risk that it may be ineffective under the taxation laws and the superannuation guarantee provisions,” Tax Commissioner Michael D’Ascenzo said.

“We are concerned that individuals may enter into these arrangement to reduce tax liabilities by splitting their income with an associate, and that the arrangement may not satisfy the personal services income tests and that the anti-avoidance provisions could possibly apply,” Mr D’Ascenzo said.

“The ATO is reviewing these arrangements and will be writing to entities facilitating them about our concerns that they may risk contravening the promoter penalty laws.”

Mr D’Ascenzo also reminded firms entering into such arrangements that they may not be withholding the appropriate amount of tax and providing the correct superannuation support to the individual participants and may be liable for penalties and charges under the Taxation Administration Act 1953 and the Superannuation Guarantee (Administration) Act 1992.

The Tax Office said that anyone seeking guidance on this issue before April 30 will be entitled to a reduction in any penalties that might apply if the arrangements prove to be ineffective.


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