SLA's - The Tax Man Cometh!
Have just spoken to someone who has told me the ATO have classified yet another scheme that was apparently favoured by pilots/doctors/lawyers etc a Part IVa tax avoidance scheme and will be imposing stiff and hard penalties in the near future if not already.
This scheme is known as SLA's - substitute loan agreements (or something very similar).. .It was favoured by an organisation used by many pilots (who subsequently boasted of said individuals financial prowess of turning them into millionares in a short period) to invest their funds,super etc.. .This is how it apparently works.
Offshore companies that invest in shares in Australian registered companies on the share market are paid a dividend, and a tax imputation credit is a portion of that dividend.
Foreign nationals or offshore organisations are not allowed to utilise the tax imputation credit portion so here comes the scam.
Just before the dividend is announced the shares are transferred to an Australian individual who becomes the new registered owner of those shares and hence receives the share dividend and the tax imputation credit portion accordingly.
After a short period (a few days typically) the shares, plus dividend and a large portion of the tax imputation credits are returned offshore to the original investor,the middlemen (organiser of this scheme,stockbrokers and the individual whose name the shares were transferred into) get to keep a cut of the tax imputation credits - of which tax has already been paid effectively.
Because of the underhanded nature of this system the tax man is seeking a 100% return of all profits,plus a 100% penalty,plus 14% interest since about 1996 when this scam first surfaced.
I personally knew of one MEL based pilot boasting of holding some $5,000,000 worth of shares in a company that produced a 4% dividend.. .The tax imputation portion is about 30% of that figure so lets say $66,000.
What this means is that effectively the tax man will be wanting close to 4 times the original tax imputation credit amount returned to them.....OUCH!
Cheers guys and thought you just may be interested.
[ 02 February 2002: Message edited by: Dambuster ]</p>