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Recognising, rejecting and reporting unlawful tax and super schemes

How to recognise unlawful tax and super schemes and the red flags associated with them.

Last updated 22 August 2024

How unlawful tax and super schemes operate

Unlawful tax and super schemes include tax avoidance and tax evasion schemes. They often involve a series of complex transactions. The schemes typically move funds through several entities, such as trusts, to avoid or minimise tax otherwise payable.

Schemes may include channelling money inappropriately through SMSFs either to:

Schemes may also involve distorting the way funds are used to enable a taxpayer to claim deductions, tax credits or offsets that they are not entitled to.

How to recognise an unlawful tax scheme

Some indicators may include where the scheme:

  • is carried out in a contrived or artificial way
  • uses complex structures or intra-group transactions to create tax benefits that are unrelated to the commercial activity
  • involves a low level of financial risk and a large tax benefit not usual for a commercially driven transaction
  • includes any of the following:
    • round robin finance
    • circular funds movement
    • non-recourse or limited recourse loans paid off by future earnings
    • use of tax exempt entities such as charities, or entities with accumulated tax losses, to wash income
    • use of a tax haven or bank secrecy country without any sound economic reason.

You can also watch Tax SchemesExternal Link and Before you commit, check it's legitExternal Link

For more information see:

How to report an unlawful tax or super scheme

With your help, we can challenge promoters and take steps to protect your clients from participating in schemes that may lead to tax debts or penalties.

Advising us of unlawful tax or super schemes and scheme promoters helps us to protect the integrity of the tax and superannuation systems.

It helps maintain a level playing field for you, by preventing less reputable agents obtaining a competitive advantage through selling unlawful tax or super schemes.

Find out more about how to make a tip-off.

You can also report schemes and promoters.

If you are involved in promoting an unlawful tax or super scheme

You can be subject to penalties where:

  • your conduct results in you or another entity being a promoter of an unlawful tax or super scheme
  • you promote a scheme on the basis that is consistent with a public, private or oral ruling, but the scheme is materially different to that described in the ruling
  • you implement a scheme promoted on the basis of compliance with a public, private or oral ruling in a way that is materially different to that described in the ruling
  • you promote a scheme that involves super being accessed before the conditions of release are met.

If you find yourself inadvertently involved in the promotion or implementation of a scheme and you let us know, we will help you.

Depending on the conduct, we may accept a voluntary undertaking. We take a careful and considered approach to legal action. We only go to court after carefully considering a range of factors, including the seriousness and extent of the prohibited conduct.

For more information, see: promoter penalty laws and PS LA 2021/1 Application of the promoter penalty laws.

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