Try cheating on your tax and fail: get slap on wrist

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.

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2 Responses to Try cheating on your tax and fail: get slap on wrist

  1. Patrick says:

    It’s quite an unusual case.

    The 10% penalty partly reflects that he received professional advice on the whole thing, and relied on same. The professional advice was in fact very bad, so much so that he has successfully sued the lawyer involved for negligence:

    Very few taxpayers escape with 10% penalties.

  2. Nicholas Gruen says:

    He should be fined a large amount – say ten or a hundred times the tax avoided – to be recovered from the negligent lawyer.

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