ATO warns: Don’t exploit concessions

In a bid to help businesses – including salon owners – stay afloat throughout the pandemic and the recession it sparked, the federal government introduced an expanded asset write-off scheme and, more recently, the loss carry-back provisions.

However, the Australian Taxation Office (ATO) has noted businesses exploiting the tax concessions.

ATO second commissioner Jeremy Hirschhorn warned against the use of “artificial mechanisms to take advantage of these measures”. 

Such mechanisms could include “structured transactions where the plant and equipment is not actually used in your business, intellectual property migration with no change in real activity [and] asset swaps with related parties”. 

“These measures should be embraced, but for the purpose for which they were introduced,” Mr Hirschhorn said. “Invest in new plant, upgrade your facilities, claim a tax offset and reinvest the money in your business and jobs!”

Mr Hirschhorn also advised businesses and financial officers not to “artificially shift profits (and losses) around your group to access the loss carry-back. Similarly, accessing the loss carry-back to support executive bonuses, increased dividends, or to repatriate cash to offshore related parties is likely to be viewed poorly by the community,” he said. 

Encouraging businesses to “follow the tax law, but also follow the spirit of the law”, Mr Hirschhorn acknowledged that 92.5% of Australian companies meet their tax obligations, and 96.3% do so after tax office compliance activity. 

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