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Get a second (investment) opinion

The ATO is encouraging anyone unsure about a tax investment they have been offered to seek a second opinion from an independent and trusted tax professional, so as not to be fooled by legitimate-looking tax avoidance schemes.

Deputy Commissioner Tim Dyce says illegal schemes are usually designed to appear legitimate, even to experienced investors, but there are tell-tale signs you can look out for.  In particular, he advises people to watch out for unusual financing arrangements such as round-robin financing and non-recourse loans.

In one case, promoters offered a ‘mortgage management plan’ promising to assist investors in repaying their home loan sooner.

The scheme involved using the equity in their home to get additional loans to claim investment deductions equivalent to home loan interest payments.

Be wary of promoters that:

• offer zero-risk guarantees for their product;
• refer you to a particular adviser or expert. They may seek to persuade you by claiming the adviser has specific knowledge about the arrangement and the promised tax benefits; and
• ask you to maintain secrecy to protect the arrangement from rival firms and discourage you from obtaining independent advice.