Footnotes

Chapter 1 - Introduction

[1]           While some estimates indicate participants in mass marketed schemes at over 100,000, ATO data show that it has taken action involving over 57,000 participants with more than 8000 participants also expected to be subject to ATO measures. ATO Submission No. 845, p.1.

Chapter 2 - Nature and Scale of the Problem

[1]            ATO Submission No. 845, p.1.

[2]            ATO Submission No. 845, p.1.

[3]            Michael Carmody, ‘Beware the Magic Pudding’, Commissioner’s address to the Australian Society of CPAs, 12 June 1998, p.3.

[4]            See in particular the examples in Attachment D to ATO Submission No. 845. See also the example cited in Senate Economics References Committee, Inquiry into the Operation of the Australian Taxation Office, March 2000, p.31. According to the ATO, the example indicates a ‘typical’ arrangement in which a participant on the top marginal tax rate received a tax refund of $14,000 for an initial $10,000 investment, generating a profit or ‘bonus’ of $4000.

[5]            Evidence, p.486.

[6]            Evidence, Perth, p.69.

[7]            Evidence, p.211.

Chapter 3 - The ATO’s Position at Law

[1]            Commonwealth Ombudsman, The ATO and Budplan: Report of the Investigation into the Australian Taxation Office’s handling of claims for tax deductions by investors in a tax-effective financing scheme known as Budplan, June 1999, p.1. Commonwealth Ombudsman, The ATO and Maincamp: Report of the Investigation into the Australian Taxation Office’s handling of claims for tax deductions by investors in a tax-effective financing scheme known as Maincamp, January 2001, p.27.

[2]            ATO Submission No. 845, p.5.

[3]            Ibid.

[4]            ATO Media Release Nat00/63, ‘Tax Office ruling on investment schemes TR 2000/8’. See Attachment A3, ATO Submission No. 845.

[5]            Overview of Taxation Ruling TR 2000/8 (Investment Schemes), Attachment C in ATO Submission No. 845, pp.1-2.

[6]            Ibid, p.2.

[7]            Ibid.

[8]            ATO Submission No. 845, p.6.

[9]           For more on this issue, see ‘Fee Levels in Projects’ and ‘Fee Levels and Deductibility’ in ATO Supplementary Submission No. 845A.

[10]          Overview of Taxation Ruling TR 2000/8 (Investment Schemes), Attachment C in ATO Submission No. 845, pp.5-6.

[11]          Ibid.

[12]          Evidence, p.497.

[13]          Evidence, p.493.

[14]          In addition to the Commissioner’s discretion, the statutory penalty of 50 per cent can be reduced to 25 per cent if the taxpayer has a reasonably arguable position, or under section 226Z can be reduced by 80 per cent if a taxpayer notifies the Commissioner of a tax shortfall prior to an ATO audit.

[15]          Evidence, pp.18-20 and 486.

[16]          TD 93/19, 4 February 1993, p.1.

[17]          ATO Submission No. 845, p.2.

[18]          Michael Carmody, Commissioner of Taxation, ‘Ethics and Taxation’, Speech to the Edmund Rice Business Ethics Forum, Sydney, 28 October 1999, p.3.

[19]          Michael Carmody, Commissioner of Taxation, ‘Taxation...Current Issues and Future Directions’, Speech to the Australian Institute of Company Directors, Perth, 1 May 2001, p.6.

[20]          Evidence, p.503. On the type of options under consideration, see Evidence, pp.35-36, 503-504 and ATO Submission No. 845, p.12.

Chapter 4 - The ATO, the Market and Investors

[1]           ATO Submission No. 845, p.2. See also Evidence, pp.470-476.

[2]            Figures from ATO Supplementary Submission No. 845A, p.17.

[3]            ATO Supplementary Submission No. 845B, Response to Hansard Page Question on Notice: E 472-3.

[4]            ATO Submission No. 845, p.2. As table 3.1 shows, the deductions for the 1996-97 income year were later revised at over $1.3 billion.

[5]            Evidence, p.484.

[6]            Evidence, p.470.

[7]            Evidence, p.470.

[8]            TR2000/08 superseded the ATO’s draft afforestation ruling TR97/D17 issued in October 1997.

[9]            See, for example, Evidence, Perth, p.78.

[10]          Michael Carmody, ‘The Integrity of the Private Binding Rulings System’, Melbourne 15 November 2000, p.3.

[11]          Evidence, p.479.

[12]          Evidence, p.481.

[13]          Evidence, p.481.

[14]          ATO Media Release, ‘Tax Shelters – Why Some Umbrellas Sometimes Have Holes’, 91/26, 2 June 1991.

[15]          Ibid.

[16]          ATO Submission No. 845, p.13.

[17]          PCD 9, ‘Afforestation Schemes – Deductibility of Fees and Capital Gains Tax Issues’, 20 December 1995.

[18]          For example, see TR2000/8, especially paragraphs 64-67.

[19]          See Attachment A, ATO Additional Information of 22 May 2001, p.7.

[20]          While the overall level of deductions in 1988 is overshadowed by the level in 1998, the relative rate of growth in deductions in 1987-88 (an almost ninefold increase) exceeds that in 1996-97 (less than double).

[21]          ATO Supplementary Submission No. 845B, Attachment 4.

[22]          ATO Supplementary Submission No. 845B, Response to Hansard Page Question on Notice: E 472-3.

[23]          It should be noted that the annual scheme deductions in Table 3.2 do not include deductions for EBAs. This accounts for the difference in yearly figures between tables 3.2 and 3.1 (the latter includes EBA deductions).

[24]          Supplementary Submission No. 22A, p.3.

[25]          ATO Supplementary Submission No. 845B, Answer to Hansard Page Question on Notice E478.

[26]          A PBR only covers the individual who applied for it from the ATO; that is, PBRs cannot be relied upon or interpreted by others as indicating ATO approval for a particular scheme’s tax benefits. For an explanation of PBRs, see ‘The Integrity of the Private Binding Rulings System’.

[27]          Evidence, pp.478-479.

[28]          Evidence, pp.485-486.

[29]          Commonwealth Ombudsman, The ATO and Maincamp, January 2001, p.14.

[30]          See the discussion of Financing Unit Trusts in the later section in this chapter on ‘Prospective versus Retrospective Action’.

[31]          Commonwealth Ombudsman, The ATO and Maincamp, January 2001, p.14.

[32]          See the report by Mr Tom Sherman AO, Report of an Internal Review of the Systems and Procedures relating to Private Binding Rulings and Advance Opinions in the Australian Taxation Office, 16 November 2000. As the report notes, the Commissioner of Taxation authorised the review following ‘media criticism of aspects of the system’ (p.1).

[33]          Claimed deductions went from $281,944,653 for the 1995-96 financial year to $652,287,396 for the 1996-97 financial year. See ATO Supplementary Submission No. 845A, p.17.

[34]          See the statement by ATO Assistant Commissioner, Peter Smith, on constraints the ATO faces in issuing early warnings to the market place: ‘[I]f we make our call too early we can leave ourselves subject to commercial damages if we get it wrong’, Evidence, p.485.

[35]          Evidence, p.485.

[36]          ASIC was called the Australian Securities Commission (ASC) at that time.

[37]          See, for example, ‘ASC puts shonky tax scheme promoters on notice’, 21 April 1997 (Media Release ASC 97/00); and ‘ASC declares war against shonky tax-driven schemes’, 20 May 1996 (Media Release ASC 96/85).

[38]          A point also noted by Mr Leibler, Supplementary Submission No. 22A, p.4.

[39]          ATO Supplementary Submission No. 845B, p.1.

[40]          Evidence, p.120.

[41]          Evidence, p.211.

[42]          Evidence, Perth, p.119.

[43]          Evidence, Perth, p.121.

[44]          Evidence, p.485.

[45]          See the attachment to Supplementary Submission No. 22A, pp.5-6.

[46]          Supplementary Submission No. 22A, p.6.

[47]          Evidence, p.482.

[48]          Evidence, pp.477-483.

[49]          Evidence, p.481.

[50]          IT2512 states: ‘this Ruling will not disturb any prior advice given by this office as to the tax implications of a particular case where the arrangement is carried into effect on the factual basis on which the advice was formulated’. Supplementary Submission No. 22A, p.7.

[51]          Evidence, p.478.

[52]               See Evidence, p.481.

[53]          Evidence, pp.505-506.

[54]          Evidence, p.480.

[55]          ATO Submission No. 845, p.4.

[56]          ATO Submission No. 845, p.13.

[57]          ATO Submission No. 845, p.13.

[58]          Evidence, p.503.

[59]          Evidence, pp.503-504 and ATO Submission No. 845, p.12.

[60]          See Senate Economics References Committee, Inquiry into the Operation of the Australian Taxation Office, March 2000, p.xii.

[61]          Evidence, p.485.

[62]          Evidence, p.139.

Chapter 5 - Current ATO Handling of MMS: Part IVA, Settlements and Debt Collection

[1]            Senate Economics References Committee, Inquiry into the Operation of the Australian Taxation Office, pp.37-38.

[2]            Inquiry into the Operation of the Australian Taxation Office, pp.39-40.

[3]           ATO Supplementary Submission No. 845A, p.19.

[4]            See Chapters 2 and 3.

[5]            Evidence, p.493.

[6]            Evidence, p.497.

[7]            Evidence, p.497.

[8]            Evidence, p.493.

[9]            Commonwealth Ombudsman, The ATO and Maincamp, January 2001, p.19.

[10]          Commonwealth Ombudsman, The ATO and Maincamp, January 2001, p.19.

[11]          Commonwealth Ombudsman, The ATO and Maincamp, January 2001, p.19.

[12]          Commonwealth Ombudsman, The ATO and Maincamp, January 2001, p.19.

[13]          Submission No. 864 and Evidence, pp.139-141.

[14]          Evidence, p.448.

[15]          ATO, ‘Tax Office reduces interest applying to some mass marketed “tax effective” schemes debts’, Media Release Nat 01/30. See also Michael Carmody, Commissioner of Taxation, ‘Taxation...Current Issues and Future Directions’, Speech to the Australian Institute of Company Directors, Perth, 1 May 2001.

[16]          Backgrounder to Media Release Nat 1/30, reproduced in ATO Supplementary Submission No. 845B, p.5.

[17]          See the Commissioner’s discussion of the emergence of ‘game playing’ by those who ‘see the ATO as someone to be beaten through smart moves and reliance on grey areas of the law’ in his 1 May 2001 speech, ‘Taxation...Current Issues and Future Directions’.

[18]          Addendum to the Code of Settlement Practice, p.5. See Attachment I in ATO Submission No. 845.

[19]          Submission No. 852. See the ATO’s response to this point in ATO Supplementary Submission No. 845A, p.12.

[20]          Submission No. 864, p.1.

[21]          Submission No. 864, p.1.

[22]          Evidence, Perth, p.70.

[23]          Commonwealth Ombudsman, The ATO and Maincamp, January 2001, p.23.

[24]          Commonwealth Ombudsman, The ATO and Maincamp, January 2001, p.23.

[25]          Commonwealth Ombudsman, The ATO and Maincamp, January 2001, p.23.

[26]          Commonwealth Ombudsman, The ATO and Maincamp, January 2001, p.24.

[27]          Evidence, p.216.

[28]          ATO Supplementary Submission No. 845B, Attachment 6, pp.5-6.

[29]          ATO Supplementary Submission No. 845B, Attachment 6, p.5.

[30]          ATO Supplementary Submission No. 845B, Attachment 6, p.5 and Attachment 3.

[31]          ATO Supplementary Submission No. 845B, Attachment 6, p.11.

[32]          Commonwealth Ombudsman, The ATO and Maincamp, January 2001, p.24.

[33]          Evidence, p.211.

[34]          Evidence, p.487.

[35]          Evidence, p.488.

[36]          Evidence, p.488.

[37]          ATO Supplementary Submission No. 845B, Policy Announcement by Commissioner, p.8. The ATO noted that it ‘is aware of approximately 45 individual participants in mass marketed schemes that have filed for bankruptcy themselves’. Answer to question on notice E 489-490, p.3.

[38]          Evidence, Perth, p.120.

[39]          ATO Supplementary Submission No. 845B, Attachment 6, p.51.

[40]          ATO Media Release, 5 April 2001.

[41]          ATO Media Release, 5 April 2001.

Chapter 6 - Test Cases and Objections

[1]            Evidence, p.243.

[2]            Mr Mike Hutson, Evidence, p.238.

[3]            Evidence, Perth, p.91.

[4]            Letter from Deputy Chief Tax Counsel, ATO to Minter Ellison, 21 October 1998.

[5]            The status of the fourth is unclear.

[6]            Backgrounder to ATO media release 01/30, dated 26 April 2001.

[7]            ATO, Submission No. 845, p.9.

[8]            ATO, Submission, No. 845, p.9.

[9]            Evidence, Perth, p. 98.

[10]          Foodland Associated Ltd, ASX-Signal -G, 1.2.2001.

[11]          Backgrounder to ATO media release 01/30, dated 26 April 2001, p.5. The ATO is continuing to issue notices of amended assessment in cases where it has disallowed scheme deductions. These are not to be confused with the final amended assessment at which point payment is required. The ATO states that those receiving notices of amended assessment may still lodge an objection with the ATO and recovery action will be suspended in accordance with the 26 April announcement.

[12]          ATO media release Nat 01/30. See the discussion in chapter 5 on this measure.

[13]          The first application for test case funding was lodged on 31 August 1998 and refused by the ATO.

Minority Report - Liberal Senators

[1]           ATO Media Release, 5 April 2001.

[2]           ATO Supplementary Submission No. 845B.