Today’s Banking Day has the story of how Aussie John Symond avoided nearly $6 m in tax through an artificial arrangement which the Tax Office ‘looked through’ to send him a bill for the money.
In 2004, the Australian Taxation Office started looking into Symond’s tax affairs, and, in 2006, it formed the view that the redemption of preference shares was “a de facto dividend distribution from profits and should be treated as such.”
It also said that it had formed a preliminary view that the redeemable preference share structure “was not a necessary part of the Aussie group restructure and was implemented to enable Mr Symond to access untaxed profits of the group in a tax free form.”
The penalty for this cleverness was repayment of the tax owed, plus interest, and a penalty of less than 10% of the amount avoided.
The resolution of the tax matter involved Symond agreeing to pay an additional $5.9 million of tax, a penalty of $600,000 and interest of $445,000. The payment was made in August 2008.
So it’s pretty clear what the message is. Your expected returns are higher having a crack at any tax avoidance scheme you fancy unless you’re more than 90% sure you’ll be detected, challenged, pursued and your claim rejected.