ATO Scrutiny on Offshore Tax Havens

November 2017

The ATO is well advanced in its investigations into the offshore investment practices of Australian companies revealed in the massive document leak known as the Paradise Papers.

The release of the Paradise Papers earlier this month has exposed the offshore investment structures of Australian companies and high net wealth individuals. And the Australian Tax Office is well advanced into its investigations.

The release of more than 13.7 million documents has revealed significant details about the tax structures of multinational companies registered in Bermuda, including Australian companies, via confidential minutes, emails, financial statements, loan agreements, and tax-structuring plans in a massive leak that rivals 2015's release of the so-called Panama Papers.

The ATO has confirmed that many companies identified by the leak are meeting their Australian tax obligations, however, it has taken action against 19 companies and is working with its network of Australian and international agencies to identify possible tax avoidance activity.

Specifically, it is said to be looking at tax structures that hold income, offshore investments, and taxpayers who have placed money offshore in known tax havens.

Australians with offshore interests have previously been given the opportunity to disclose these sorts of structures as part of Project Do It, which granted an amnesty for voluntary disclosure. It's unlikely that the ATO will offer amnesty this time around. 

"Don't wait for the ATO to knock on your door. If you have any offshore income, investment, or foreign holdings in known tax havens, it's better to be proactive and review your position with a specialist in International tax who can help you work with the ATO if necessary," says Bates Cosgrave director, Matt Zhou.

"In some cases, there will be taxpayers who simply didn't know how their holdings are structured but that's not likely to get far with the ATO.  Most times, the outcomes will be better for the taxpayer if they are on the front foot and disclose any issues.

"But if the ATO initiates the investigation and uncovers any nefarious activity via an audit – intended or not - you're likely to feel the full brunt of the law."    

For more information, contact Matt and his team on 02 9957 4033

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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