Loss carry back, temporary full expensing and backing business investment – accelerated depreciation are measures designed to stimulate business investment and to help businesses recover from the economic effects of COVID-19.
We recognise that most businesses comply with their tax obligations and we will continue to support those businesses. The integrity of these measures is an important part of our compliance approach. We will not tolerate illegal behaviour or the development of schemes that are designed to deliberately exploit these measures.
If we identify concerning or fraudulent behaviours we will actively pursue these claims. Penalties for fraud can include financial penalties, prosecution, and imprisonment for the most serious cases.
We will also be actively identifying tax schemes and arrangements that seek to artificially inflate or enable access to the measures. Advisers who help businesses to enter such arrangements may also face stiff penalties.
What attracts our attention
Loss carry back
Behaviours that will attract our attention include:
- deliberately inflating deductions or omitting income to generate losses
- entering into contrived schemes to obtain a benefit of the loss carry back tax offset, such as schemes involving
- shifting or creating losses through non-arm's length dealings
- shifting franking credits to a corporate entity, either directly or indirectly.
See also:
Temporary full expensing
Behaviours that will attract our attention include:
- entering into contrived schemes to obtain a benefit of a temporary full expensing deduction, including schemes involving
- manipulation of aggregated turnover, for example, entities omitting income to satisfy the $5 billion eligibility threshold, or the $50 million threshold to access temporary full expensing claims for second hand assets
- non-commercial transactions involving the transfer of an asset between related entities
- artificially inflating the cost of assets (including inappropriate valuations) through non-arm's length dealings
- claiming temporary full expensing deductions for assets acquired solely for a non-business purpose or failing to take into account any portion of non-business use
- deliberately misclassifying or reclassifying excluded assets, for example, reclassifying capital works and buildings as eligible assets under temporary full expensing
- failing to take into account the car limit when calculating the deduction
- lacking evidence to substantiate the claim (including the cost of assets) such as invoices, contracts, supplier agreements or independent valuations.
See also:
Backing business investment – accelerated depreciation
Behaviours that will attract our attention include:
- entering into contrived schemes to obtain a benefit of a backing business investment – accelerated depreciation deduction, including schemes involving
- manipulation of aggregated turnover, for example, entities omitting income to satisfy the $500 million backing business investment – accelerated depreciation threshold
- inappropriate asset valuations especially when the asset has been purchased on a non-arm’s length basis
- deliberately misclassifying or reclassifying Division 43 capital works and buildings as eligible assets under backing business investment – accelerated depreciation
- claiming backing business investment – accelerated depreciation deductions for assets acquired solely for a non-business purpose or failing to take into account any portion of non-business use
- deliberately inflating the amount of the backing business investment – accelerated depreciation deduction by applying the incorrect adjustable value or effective life
- failing to take into account the car limit when calculating the deduction
- lacking evidence to substantiate the cost of assets such as invoices, contracts, supplier agreements or independent valuations.
What we are doing
We will review claims for the loss carry back tax offset, temporary full expensing and the backing business investment – accelerated depreciation deduction as part of our compliance activities. Taxpayers and advisers who have entered into the types of arrangements identified will be subject to increased scrutiny.
We may also refer registered tax agents who advise taxpayers to inappropriately claim the loss carry back tax offset, the temporary full expensing deduction or the backing business investment – accelerated depreciation deduction to the Tax Practitioners Board, which will consider whether there has been a breach of the Tax Agent Services Act 2009.
Promoter penalty laws may also apply under Division 290 of Schedule 1 to the Taxation Administration Act 1953 for promoters of schemes.
What you should do
Check the eligibility criteria for each measure carefully before you make a claim. If you do make a claim for the loss carry back tax offset, the temporary full expensing deduction or the backing business investment – accelerated depreciation deduction, it is essential that you keep adequate records to support your claim.
If you have entered into an arrangement where you have concerns about your tax position or you have made an honest mistake, we encourage you to phone or email us to discuss it.
If you are concerned that somebody is doing the wrong thing, you can make a tip-off. We examine tip-offs and contact businesses where we have concerns and need more information. To report illegal or behaviours of concern, see Making a tip off.
Any information you provide in the tip-off will be confidential.
See also:
- Loss carry back tax offset
- Temporary full expensing
- Backing business investment – accelerated depreciation
- Record keeping for capital expenses