Is it really better to give than to receive?
Tax Law - 23 Sep 2021
ATO Taxpayer Alert TA 2021/2 – Inbound loans and gifts
What is the issue?
On 17 September 2021, the Australian Taxation Office (ATO) released Taxpayer Alert 2021/2, focused on ‘disguising undeclared foreign income as gifts or loans from related entities overseas.’
A Taxpayer Alert sets out the ATO’s concerns around a particular area it sees as risky, as well as detailing what actions the ATO is taking to address this risk.
The current Taxpayer Alert is directed towards Australian tax residents (individuals and other entities) who make profits offshore from trading or investment activities and return that profit to Australia through a non-taxable loan or gift from a related party rather than through assessable income. This offshore income can extend to capital gains and attributable income under the Controlled Foreign Company provisions.
The offshore profits may be returned to Australia directly, or indirectly through intermediaries or related parties, who may be resident in the offshore jurisdiction or in a third jurisdiction. In some cases, a taxpayer may prepare legal agreements to support the gift or loan transaction, however the objective facts do not support the transaction.
Importantly, the ATO states it has no concerns with genuine gift or loan arrangements, only arrangements which disguise profits through gifts or loans.
What should I do?
If you have an offshore investment or operating structure, we can assist you to review the structure and let you know whether any further action is required to ensure that it is as effective as possible while remaining compliant with Australian and international tax laws.
If you are receiving a gift or loan from an offshore party (related or unrelated) or you are receiving an inheritance from an offshore relative, we can assist you to appropriately document the arrangement to ensure it reflects your intentions and assists in situations where the ATO seeks to review the transaction.
Reach out to us today for a no-obligation free chat – either remotely or with coffee!
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The information contained in this blog is general in nature and should not be considered to be legal, tax, accounting, consulting or any other professional advice. In all cases, you should consult with a professional advisor familiar with your factual situation for advice concerning specific matters before making any decisions. By reading this blog, you confirm your understanding of this disclaimer.