How to Safeguard Your Business from Unlawful Tax Schemes

The Australian Tax Office (ATO) is warning small business owners to be cautious of illegal tax schemes that promise to reduce or eliminate tax liabilities. Recently, there has been an uptick in tax avoidance schemes being promoted online, especially through social media platforms. These schemes often target well-meaning business owners, leading them into arrangements that could result in significant financial consequences, including having to repay incorrect tax refunds and facing other penalties.

What is an Unlawful Tax Avoidance Scheme?

An unlawful tax avoidance scheme involves methods that falsely promise tax benefits that are not legally available. In some cases, tax advisers may misleadingly claim that these schemes are backed by the ATO’s recent rulings or try to exploit changes in tax laws.

Such schemes may include:

• Tax Avoidance: This involves claiming deductions that you are not entitled to, which can result in reduced tax payments.
• Tax Evasion: This is the illegal act of deliberately providing false or misleading information to the ATO. This might include underreporting income or engaging in fraudulent activities to decrease or eliminate tax obligations.
• Superannuation Schemes: These involve encouraging individuals to access their superannuation funds before they meet the legal requirements for early withdrawal.

How Are These Schemes Promoted?

These schemes can be marketed in a variety of ways. Some are broadcast widely through social media, while others are more targeted, offering tailored advice to individuals in specific situations, like those planning for retirement. These schemes are often promoted in private groups or one-on-one consultations.

How to Avoid Unlawful Tax Avoidance Schemes

The ATO recommends the following steps for small business owners to protect themselves from falling into these traps:

• Do Thorough Research: It’s essential to fully understand the tax decisions you make. Even if you receive bad advice, you are still ultimately responsible for your business’s tax obligations.
• Be Wary of Unrealistic Offers: If something sounds too good to be true, it probably is. Seek independent advice from a registered tax professional before committing to any tax arrangement.
• If You’ve Been Unwittingly Involved: If you find that you’ve unintentionally participated in an unlawful scheme, contact the ATO as soon as possible. Taking prompt action could help reduce any penalties or consequences you may face.

By staying vigilant and well-informed, you can avoid falling victim to these schemes and keep your business on the right track.