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Paradise Papers serve up a reminder that the ‘Tax Avoidance’ Amnesty net has well and truly closed

06 November 2017

BDO Australia, Tax Partner, Carlo Moretti said the net has well and truly closed on people who avoid paying the correct amount of tax in Australia by using off-shore structures and accounts.

“Today’s Paradise Papers scandal proves that it's not just regulatory bodies that people have to worry about when avoiding their tax obligations. It’s essential for taxpayers to review the legality of any offshore transactions,” Mr Moretti said.

“The net continues to close and the more people continue to avoid paying tax, the more likely they will be identified and investigated by the authorities - and not just the Tax Office but the Australian Federal Police.”

“The Australian Taxation Office (ATO) has published a list of things that catch its attention when investigating potential tax avoidance by fraud or evasion, indicating the organisation is well aware of many common techniques for avoiding paying tax.

Project DO IT finished in late 2015, so there is no longer any ‘safe harbour’ space for taxpayers to address any actions that could be considered tax avoidance by the ATO.”

“Tax avoidance is a very significant global issue which is uniting various organisations and countries to collaboratively reduce the amount that goes unreported and undiscovered.

“We are seeing foreign banks and private wealth managers located in tax preferred jurisdictions like Switzerland and Hong Kong sending questionnaires to Australian resident taxpayers asking them to confirm various matters about their offshore structure and account, which the foreign bank or adviser intends to share with the foreign authorities and Tax Office. Hence many tax preferred jurisdictions now have local reporting requirements for assets held in their country that ultimately belong to non-residents.

“If you are caught up with these types of offshore arrangements and you are not certain about your tax position in Australia and / or offshore, you’re urged to immediately consult your preferred tax adviser, and subject to that advice, it may be prudent to seek the advice of a qualified and experienced independent tax adviser who has nothing to gain or lose from critically reviewing your offshore financial affairs.”  

“Setting aside possible primary tax shortfalls for an unlimited amendment period, shortfall penalties can be imposed at the rate of 90% of the primary tax shortfall plus interest charges at the higher rate and referral of your case to relevant authorities for possible criminal prosecution. In other words, the Tax Office may be inclined to throw the book at you if you try and hide. It’s best to get on the front foot before the Tax Office taps you on the shoulder.”