We’ve released Taxpayer Alert – TA 2024/01: Early stage investor tax offset claimed using circular financing arrangements in response to a new tax avoidance scheme being promoted in the community.
Under the scheme, an investment opportunity in a start-up company is promoted to individuals by the scheme operators. The operators assure the interested individuals that the start-up qualifies as an early-stage innovation company (ESIC) and they can claim the early stage investor tax offset (tax offset). The operators lend the individual the money to buy shares in the start-up and then funds are moved around between the start-up, the individual investor and the operator to access the tax offset. We’re concerned that these start-ups don’t qualify as ESICs.
If you think your client is considering getting involved in this type of scheme, discourage them from doing so and outline the consequences. If they’ve already invested, encourage them to contact us for help.
We take tax avoidance schemes very seriously. Registered tax agents found to be promoting these arrangements may be referred to the Tax Practitioners Board to assess if there’s been a breach of the Tax Agent Services Act 2009.
Promoter penalty law changes that came into effect from July 2024 mean entities found to be promoting schemes could face significant penalties for each contravention of these laws.
We’re reviewing these arrangements to identify companies, tax agents and taxpayers involved and will take corrective action. TA 2024/1 doesn’t apply to genuine investments in qualified ESICs.
For more information, visit Recognising, rejecting and reporting unlawful tax and super schemes.