Tax Planning or Tax Avoidance – Know the difference!
We are living in unprecedented times. The COVID-19 pandemic has seen the emergence of creative schemes and transactions counter to the spirit of the law, for example the withdrawal of superannuation monies via the COVID-19 early release and subsequent recontribution to claim a deduction. These schemes have attracted the ATO’s unfavourable attention with warnings of potential application of Part IVA. Part IVA is a catch-all provision, flexible and far reaching, having the potential to be applied to a vast range of arrangements and with severe consequences if applied to taxpayers.
Part IVA only applies to tax avoidance as opposed to tax planning; it is important to know the difference to stay on the right side of the ATO.
Tax planning – Tax planning is where taxpayers exercise specific choices under the legislation to benefit from various tax concessions through legitimate arrangements.
Tax avoidance – Tax avoidance occurs when a taxpayer although complying with the black letter of the law minimise their tax liabilities that is inconsistent with the intent of the legislation.
Tax planning strategies are implemented by Australian tax-payers year in and year out often to great effect, however, given the seriousness of the ATO’s Part IVA and the rather broad definitions differentiating tax planning with tax avoidance, it is vital that taxpayers seek professional advice so as to maximise their tax position whilst avoiding the ire of the Tax Office. When in doubt ask the question of your accountant.
We can do this online – making it one less thing to worry about. Other documents needed for our records are certified copies of the Death Certificate and the Will.
Following lodgement of the initial trust return, further returns will need to be lodged for each year (for up to three years) until the deceased estate is fully administered (i.e. all assets and income are distributed to the beneficiaries) and it is no longer earning income.
Care needs to be taken where the sale of shares and/or property is involved – our financial advisers are available to assist in this regard.
At a time when there is so much to take care of, our team is here to help so please do not hesitate to contact us.