Australian government consults on expanded penalties for tax scheme promoters

Monday, 02 October 2023
The Australian government is consulting on draft legislation that would expand promoter penalty provisions and increase Australian Tax Office (ATO) powers.

The consultation examines four separate proposals to reform the promoter penalty regime, increase the power of regulators, extend whistleblower protection to disclosures related to tax practitioner misconduct and remove limitations in tax secrecy laws.

With respect to the promotor penalty regime, the proposals would amend the Taxation Administration Act 1953 through the Treasury Laws Amendment (Measures for Consultation) Bill 2023: PWC Response – promoter penalty laws reform.

In particular, the penalty regime would be widened to apply to all ATO rulings (public, private and oral). The current regime does not prohibit promoters using categories of rulings to mislead clients into believing that a tax scheme conforms with an ATO product ruling. The provisions will also apply regardless of whether a scheme has been implemented.

The government also proposes to widen the definition of ‘promoter’ to encompass entities that receive a benefit through the marketing or growth of a tax exploitation scheme. ‘This change is intended to broaden the definition of 'promoter' to encompass scenarios where a promoter receives a benefit which is less obvious, intangible or disguised, from promoting a scheme’, explains law firm Minter Ellison.

The Bill would increase the penalties non-compliant corporate bodies would face. Currently, this penalty stands at 25,000 penalty units (currently AUD7.8 million). Under the Bill, the maximum penalties would increase to the greater of 50,000 penalty units (currently AUD15.6 million), three times the ‘benefit’ received directly or indirectly as a result of the scheme or 10 per cent of the aggregated turnover of the entity for the most recent fiscal year before it engaged in the non-compliant conduct.

Further, it would extend the time limitation period for commencing civil penalty proceedings from four to six years.

The consultation is open for comment until 4 October 2023.


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