ATO warns about labour hire arrangements using a discretionary trust

The ATO today issued a taxpayer alert warning people to be cautious when entering into an arrangement with a firm that includes steps to split their income with an associate, usually their spouse, by using a discretionary trust.

"I'm concerned that people involved in this arrangement may be unaware of the risk that it may be ineffective under the taxation laws and the superannuation guarantee provisions," Tax Commissioner Michael D’Ascenzosaid.

"We are concerned that individuals may enter into these arrangement to reduce tax liabilities by splitting their income with an associate and that the arrangement may not satisfy the personal services income tests and that the anti-avoidance provisions could possibly apply," Mr D’Ascenzo said.

"The ATO is reviewing these arrangements and will be writing to entities facilitating them about our concerns that they may risk contravening the promoter penalty laws."

Mr D’Ascenzo also reminded firms entering into such arrangements that they may not be withholding the appropriateamount of tax and providing the correct superannuation support to the individual participants and may be liable for penalties and charges under the Taxation Administration Act 1953 and the Superannuation Guarantee (Administration) Act 1992.

Anyone who has participated in these arrangements should seek guidance from the ATO prior to 30 April 2011 and before they are contacted by us. If they do so, they will be entitled to a reduction in any penalties that might apply if the arrangements prove to be ineffective.

Taxpayers wishing to discuss their involvement in theses arrangements orto provide information about people or companies who may be promoting arrangements covered by this alert should call the ATO on 1800 177 006. People can also use this number if they want more information about thistaxpayer alert.

Tax agents with information about people or companies who may be promoting arrangements covered by this alert or other arrangements of concern should also call 1800 177 006

Source:

Australian Taxation Office (2011). ATO warns about labour hire arrangements using a discretionary trust. Retrieved March 8, 2011, from:
http://www.ato.gov.au/corporate/content.asp?doc=/content/00271401.htm

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