On 15 March 2007, the Australian Tax Office (ATO) released two draft practice statements on the administration of the promoter penalty laws. The draft practice statements deal with both limbs of the promoter penalty laws, being:
conduct resulting in an entity being a ‘promoter’ of a ‘tax exploitation scheme’, and
conduct resulting in a scheme, which has been promoted on the basis of conformity with a product ruling, being implemented in a way that is materially different from that described in the product ruling.
Key points arising from the practice statement which concerns the first limb are:
Tax officers who identify the potential application of the promoter penalty laws must refer the matter to the ATO’s Promoter Compliance Team, which will review referrals to identify whether the laws potentially have application.
The ATO has also established the Promoter Penalty Review Panel (PPR Panel) to advise on the 'appropriateness of making a promoter penalty application'—it appears that the PPR Panel will operate in a somewhat similar fashion to the General Anti-Avoidance Rule Panel, although those who are exposed to the application of the laws will not be able to make submissions to the PPR Panel.
Generally, the ATO will take action against employers rather than employees where employees are acting within authority—on the other hand, where employees act outside authority, the ATO is more likely to pursue employees. Accordingly, where the conduct of employees may result in the potential application of the laws, it will be important for employers to communicate relevant guidelines to their employees and scrutinise their conduct, and for employees to familiarise themselves with those guidelines.
The ATO considers the element of 'marketing or otherwise encouraging the growth of, or interest in, a scheme requires an external element to be present'—this should limit, but not rule out, the application of the laws to in-house advisers.
The ATO is seeking comments by 20 April 2007 prior to finalising the practice statements.
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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