A5.1 This appendix sets out details of the ATO's policy and practices for imposing or remitting interest in relation to settlement offers and other concessions made to taxpayers involved in Employee Benefit Arrangements (EBAs). It also sets out some findings and conclusions in relation to both this policy and its application in practice.
A5.2 Part A of this appendix describes the nature of EBAs and a brief history of the ATO's activities on EBAs.
A5.3 Part B describes the four ways in which taxpayers participating in EBAs have received a remission of interest.
A5.4 Part C discusses the ATO's reasons for not granting to EBA taxpayers generally the nil interest and nil penalties approach which it has applied to most MMTEI investors.
Part A: Nature of ebas and history of ato activity on Employee Benefit Arrangements
Definition of Employee Benefit Arrangements
A5.5 The ATO has, for some time, categorised Employee Benefit Arrangements (EBAs) as falling into four groups: Employee Benefit Trusts (EBTs), Employee Share Plans (ESPs), Controlling Interest Superannuation (CISs), and Offshore Superannuation (OSSs). The ATO has also advised that it has identified a fifth arrangement, being Employee Share Trusts (ESTs).
Nature of EBAs
A5.6 EBAs were prevalent from the mid 1980s until early 1999. They arose particularly, but not exclusively, in the small and medium sized enterprise sector. They were marketed on the basis that they met a need for employers in that sector to provide a remuneration strategy that rewarded, retained and motivated employees, especially 'key' employees, in a way that was competitive with the remuneration that could be provided by larger listed companies.
A5.7 EBAs have the same essential elements. An employer (usually, but not necessarily, a small business proprietor) makes a contribution to a trust or to a superannuation fund for the ultimate benefit of their employees, including employee directors. The contribution is invested by the fund and generates income on which tax is paid. The contribution, together with income earned from the contribution, may be eventually paid to the intended employee beneficiary.
A5.8 A more detailed description, consisting of ATO Fact Sheets, of each of the four types of arrangements which the ATO has classified as EBAs are attached as Appendices 9 to 12.
A5.9 The perceived advantages of EBAs to participating employees were as follows. Firstly, they were flexible vehicles to use for investing as they were not subject to the investment constraints that are imposed on normal superannuation vehicles. Secondly, the contributions were not subject to superannuation contributions tax. Thirdly, the money was not locked away until retirement, the age of 65, illness or death. Fourthly, investments could be made on these employees' behalf with pre-taxed funds.
A5.10 For employers, these arrangements were perceived to be attractive for the following reasons. Firstly, they enabled monies to be paid to key employees in a tax deductible way. Secondly, the arrangements had no fringe benefits tax (FBT) or superannuation guarantee charge implications. Thirdly, the arrangements were able to be structured so that ultimate payouts could be made conditional upon the employee meeting certain business requirements (for example, meeting certain performance targets).
ATO audit activity on EBAs
A5.11 On 19 May 1999 the ATO indicated, via a press release118, that EBAs were contrived arrangements, intended to frustrate the clear policy intent of the law. Accordingly, it commenced action to withdraw the tax benefits claimed to be associated with these arrangements, an activity which has continued to the present.
A5.12 In a speech to the Financial Planning Association on 27 April 1999119, the Commissioner of Taxation outlined the features of EBAs which the ATO found of particular concern. These were as follows:
- the implementation of arrangements in circumstances that had little to do with the underlying human resource policy upon which they were predicated;
- the lack of independence of the trustee or administrator of the EBA, hence leaving the funds at the total control and discretion of the controllers of the company;
- the implementation of the arrangement where there are no arm's length employees and its use as a mechanism solely to benefit and access cash from the company by the owner-controllers of the company;
- the use of 'round-robin' financing to inflate the deduction; and
- the claimed ability to pass money out of often convoluted structures tax free.
A5.13 The ATO's withdrawal of tax benefits for EBAs applied to EBAs entered into prior to 19 May 1999 as well as those entered into after this date. It involved the ATO issuing single or (except in the cases of CIS arrangements) multiple amended assessments to participants. The single and multiple assessments all involved amounts of primary tax, interest and penalties.
A5.14 The multiple assessments were based on there being a number of possible taxing points, depending on the implementation of the particular EBA. These multiple taxing points generally included that no deduction was allowable for the contribution, or that FBT was payable on the contribution. In certain EBAs, assessments were also raised to the participating employees in that contributions on their behalf were included as assessable income in the year of contribution. Also, an employee might be assessed on the value of the ultimate benefit when and if paid. However, the ATO did flag that although it had issued multiple assessments, it would be prepared to settle a particular EBA on the basis of a single taxing point in a manner which would not allow additional taxing points to be triggered.
Tax features of EBAs
A5.15 The purpose of this review is not to make any comments on the technical merits of EBAs. The soundness of the ATO's position on EBAs is a matter for the courts.
A5.16 However, this review does set out below the alleged tax consequences of EBAs from both the participants' and ATO's perspectives. This is because these alleged tax consequences underpin the ATO's approach to the remission of the interest for certain types of EBAs. They also underpin the submissions that have been made to this review that the ATO's approach is inappropriate and inconsistent with the approaches that the ATO has adopted in other situations of tax disputes involving groups of taxpayers.
A5.17 These alleged tax consequences depend on the particular way in which the EBA is structured.
A5.18 Most EBAs are structured so that the employer receives a tax deduction for the initial contribution. No tax is paid by the trust or fund on receipt of this contribution. No FBT is payable on this contribution, either when paid to the trust or fund or when paid out to the employee. Tax is only payable, if at all, when the contribution is paid out of the trust or fund to the employee.
A5.19 EBAs can therefore have tax consequences which can range from a deferral of the tax payable by the employee on what they would otherwise receive as a salary, through to no tax, or a reduced amount of tax, being payable on the remuneration amount.
ATO advices on EBAs prior to March 1999
A5.20 Prior to March 1999, EBAs in the form of EBTs, ESPs and CISs all received advices from the ATO which confirmed the claimed broad tax consequences.
A5.21 Prior ATO advice in this context consists of 3 forms of advice. These are advice which is in the form of a private binding ruling (PBR), advice which is in the form of an advance opinion and other forms of general advice not falling within either of these other two categories. An example of general advice is where a taxpayer's adviser receives general advice on the tax consequences of a 'typical' tax arrangement which is not client specific.
A5.22 The ATO is legally bound to follow a PBR if it has been implemented in accordance with its terms. It considers that it is administratively bound to follow an advance opinion that has been properly implemented.120 The ATO therefore considers both these forms of advice to be 'binding'. The ATO does not consider that other forms of general advice are binding, even if a taxpayer has implemented this advice in accordance with its terms.
A5.23 The ATO has provided figures to this office which indicate that 24 favourable advices were issued in relation to EBT arrangements, of which 14 were binding on the ATO (that is, in the form of PBRs). For ESP arrangements, at least two favourable advices were issued. For CIS arrangements, 25 advices were issued, four of which were binding. The ATO has advised that no advices were issued on OSS arrangements.
A5.24 The ATO's provision of positive advices halted on 26 March 1999 when the ATO placed an embargo on the issue of advices on the above arrangements.121
A5.25 Subsequently, on 19 May 1999, the ATO stated that previous PBRs and advance opinions would be withdrawn, where they were not implemented according to the facts presented in the original application for ATO advice.122 On the same date, the ATO released Taxation Ruling TR 99/5 which stated that the contributions made in EBT arrangements were subject to FBT. This final ruling had been preceded by the release of an earlier draft ruling (TR 98/D12) which had raised the likelihood of FBT applying to these arrangements.
A5.26 The ATO indicated that its reason for the withdrawal of previous advices was that many of these schemes were contrived arrangements, intended to frustrate the clear policy intent of the law. In the ATO's view, the arrangements, far from securing the claimed tax benefits, exposed participants to multiple taxing points and penalties.
Original ATO concession for EBAs — the 'safe harbour' offer
A5.27 In its 19 May 1999 press release,123 the ATO indicated that its broad offer to taxpayers that had already been entered into EBAs was as follows. If participants came forward by 30 June 1999, the ATO would reduce penalties to 5 per cent and apply only a single and 'appropriate' tax liability. However, full interest would be charged from the original due date for payment of the relevant underpaid tax to the date upon which the taxpayer made full disclosure of their circumstances to the ATO. The ATO has since described this arrangement as its 'safe harbour' offer.
A5.28 This offer was not available for taxpayers engaged at the extreme end of sham and fraudulent behaviour.
Prospect of litigation on EBAs
A5.29 In its press release of 19 May 1999, the ATO acknowledged that there were fine technical distinctions and arguments associated with these arrangements and that taxpayers had the right to contest the ATO's views in the courts. However, the Commissioner flagged that the ATO was prepared to argue its views on these arrangements all the way to the High Court.
A5.30 The ATO's original concessions were premised on the basis that participants would need to forgo their objection and amendment rights. The ATO subsequently withdrew this aspect of their proposal and announced it was prepared to let these matters be tested in the courts if necessary. It also extended the time during which participants could take up the ATO's offer from 30 June 1999 to 13 September 1999.124
A5.31 In the 19 May 1999 press release, the ATO also announced that it would work with promoters of these arrangements to litigate representative cases and that objections of other participants would not be determined until court decisions had been made. However, the ATO did say that it would, to protect the community's position, raise alternative assessments to cover possible alternative taxing points. These alternative assessments included determinations that the anti-avoidance provisions of either the Income Tax Assessment Act 1936 (ITAA 1936) or the Fringe Benefits Tax Assessment Act 1986 (FBT Act) applied to the arrangements.
ATO processes for EBA safe harbour cases
A5.32 From figures provided to this office by the ATO, it appears that out of the 6562 EBA cases which the ATO has currently identified, 1535 taxpayers responded to the ATO's safe harbour offer. The ATO has also indicated that in these cases interest was 'generally' remitted in full during the period from the date of voluntary disclosure until the issue of the amended assessment. This remission was made on the basis that during this period the non-payment of the relevant tax could be attributed to ATO delay.
ATO settlement arrangements after safe harbour period expired
A5.33 After the expiry of the safe harbour period, the ATO settlement offers for EBT and ESP forms of EBAs, have, according to material provided to this office by the ATO125, generally consisted of terms which have included one taxing point, a 10 per cent penalty, full interest and a waiver of all objection and appeal rights.
A5.34 CIS arrangements have received a different arrangement owing to the outcome of court cases. This is discussed in further detail below.
A5.35 The ATO has advised that it has recently altered certain aspects of its settlement terms for EBAs involving offshore superannuation arrangements. This was as a result of the decision in the Walstern case126, also discussed below.
A5.36 The ATO has requested that OSS taxpayers submit a settlement proposal and detail any material differences between their case and that which was considered in Walstern.
A5.37 OSS arrangements which have been implemented in the same manner as Walstern (and which do not involve a safe harbour period) will now be subject to settlement terms which consist of one taxing point, a 20 per cent penalty, full interest and a waiver of all objection and appeal rights.
A5.38 OSS arrangements which are materially different to Walstern will be subject to the same settlement terms as those which have applied to OSS arrangements since the expiry of the safe harbour period. These terms have generally consisted of one taxing point, a 10 per cent penalty, full interest and a waiver of all objection and appeal rights.
A5.39 The precise terms of settlement have varied between all forms of EBA, owing to their differing structures. However, the settlement options for all EBAs have been standardised in the same manner as other settlement arrangements discussed in this report. That is, whichever settlement option applied to a participants in a particular EBA, that option would be applied according to its standardised terms. Apart from CIS cases, these standardised terms included no remission of pre-amended assessment or post-amended assessment interest.
ATO conduct in entering into settlements
A5.40 It is beyond the terms of this review to examine and comment upon the terms of the various settlement offers which the ATO have made to EBA participants since March 1999, and the methods under which the ATO has set about implementing these terms, other than to the extent that they deal with the imposition of the interest.
A5.41 However, very strong concerns have been made to this office about the nature of these other terms and their method of implementation by the ATO.
A5.42 One concern has related to the ATO's method of communicating to taxpayers the terms of these settlement offers. The ATO has advised, for example, that they have communicated to taxpayers that it does not expect payment of all the multiple assessments which may have issued. However, submissions have been made that the letters conveying this message are not clear on this point. These submissions point out that one part of these letters, for example, could be interpreted to mean that the ATO does require payment of all these amounts, but not all at the same time.
A5.43 Examples of other concerns which have been raised include considerable ATO delays in the actual settlement process and the level of penalties charged. They also include the ATO's application of the anti-avoidance provisions, the tax treatment of advisers' fees, the tax treatment of the amount of FBT charged in a multiple assessment situation and the application of the ATO's settlement terms to situations where EBA participants have retired.
A5.44 Concerns have also been raised about the conduct of ATO officers during the settlement processes and the legal form of the settlement documents themselves.
A5.45 The subject of the ATO's settlement processes generally may be considered further in determining the Inspector-General's future work program.
Revenue currently at risk in respect of EBAs
A5.46 After the expiry of the safe harbour period, a significant further number of EBA cases were identified by the ATO, through audit activity, giving rise to 6562 identified cases by 30 November 2003. The total amount of tax, penalties and interest on these cases, before any settlement, has been estimated by the ATO to be around $1.4 billion. The ATO has not been able to disaggregate this figure to show either the amount of interest included in this figure or how this figure is split between the different EBA categories. However, it has advised that this figure is based on the application of multiple taxing points on all EBAs.
A5.47 As foreshadowed by the Commissioner in 1999, there has been a substantial amount of litigation in respect of EBAs.
A5.48 To date, there have been six decided court cases involving the tax treatment of EBAs. Three of these have involved EBTs (Spotlight,127 Kajewski128 and Essenbourne129), two have involved CISs (Harris130 and Prebble131) and one has involved an OSS (Walstern132). There have been no cases on ESPs.
A5.49 These cases have offered different views on the tax aspects of an EBA arrangement.
A5.50 In Essenbourne, decided on 17 December 2002, the Federal Court found that the original contribution to the trust was not an allowable tax deduction under the general deduction provisions of the ITAA 1936. It also stated that the particular EBA did not give rise to any FBT liability. The judge also commented, without making a binding decision on this point, that, if the deduction had been allowable, the anti-tax avoidance provisions of the ITAA 1936 would not have operated.
A5.51 In Kajewski, decided on 26 March 2003, the Federal Court found that the original contribution to the trust was not an allowable deduction under the general deduction provisions of the ITAA 1936 and that, in the circumstances of the case, the taxpayers were not entitled to a reduction in the tax penalty imposed.
A5.52 In Prebble, decided on 22 August 2003, the Full Federal Court held that a tax deduction was not available for a superannuation contribution made under a controlling interest superannuation scheme. This decision was consistent with the earlier decision of the Full Federal Court in the Harris case. In Prebble, the court also held that the taxpayer should not be subject to a culpability tax penalty for the claim he had made. This was because his case for deductibility was reasonably arguable. The court made this finding about reasonable arguability despite also noting that the taxpayer's claim had not been in accordance with the policy intention of the relevant law.
A5.53 In Walstern, decided on 8 December 2003, the Federal Court held that a deduction was not allowable for superannuation contributions made to an offshore superannuation fund. It also held that, on the facts of that case, FBT applied on these contributions at the time the amounts contributed were allocated by the fund to the relevant employees. The court then raised some doubts about the ATO's practice of applying only one taxing point in EBA cases where multiple potential taxing points exist. However, it noted that this matter was not one that it needed to make a final decision on, the ATO having already indicated that it was not its intention to pursue both income tax and FBT amendments against the relevant taxpayer.
A5.54 In Spotlight, decided on 25 May 2004, the Federal Court found that the original contribution to the trust was an allowable tax deduction, under the general deduction provisions of the ITAA 1936. However, the anti-avoidance provisions of the ITAA 1936 ultimately operated to deny this deduction. The Court also held that it was reasonably arguable that these anti-avoidance provisions did not apply and that therefore the taxpayer was entitled to a reduction in the level of penalty tax that had been imposed by the ATO. The Court also found that the EBA did not give rise to any FBT liability. The taxpayer has appealed this decision to the Full Federal Court.
ATO responses to decided court cases on EBAs
A5.55 The ATO has made two significant responses as a result of the court cases on EBAs decided to date. Both were announced in an ATO Media Release dated 14 March 2003.133
A5.56 The first response related to the decision in Essenbourne. After this case, the ATO announced that it did not accept the decision in so far as it applied to FBT. It stated it would not appeal the actual decision because the denial of a tax deduction for the contribution was sufficient to make the scheme ineffective. It therefore stated it would be looking to test the FBT aspect of EBAs in future court cases.
A5.57 The second response came as a result of the decision in Prebble. After this case, the ATO withdrew all culpability penalties it had imposed in respect of participants in CIS arrangements, provided a genuine contribution was made to the fund. In addition, the Commissioner announced that, in the interests of providing an opportunity to clear up these CIS cases, the ATO would reduce the interest to a 'commercial' rate of 4.72 per cent in those cases where a contribution was made before 19 May 1999. This interest reduction was to apply for both pre- and post-amended assessment interest. The 19 May 1999 date was selected because this was the date on which the ATO announced that these schemes did not work.
Taxpayer and tax practitioner responses to the reduction in interest for all CIS cases
A5.58 After the ATO's announcement of 14 March 2003, the Taxation Committee of the Business Law Section of the Law Council of Australia released a statement134 which raised several concerns about the above two responses of the ATO to decided court cases.
A5.59 These concerns were as follows. Firstly, the Law Council objected to the ATO ignoring the FBT aspects of the decisions, noting that this was inconsistent with the ATO's undertakings in the Taxpayers' Charter and also its overall duty to apply the law to collect only the correct amount of tax.
A5.60 Secondly, the Law Council argued that the ATO should withdraw penalties levied for EBT type arrangements, because the basis for application of penalties in these cases was 'symmetrical' with that which applied to CIS cases.
A5.61 Thirdly, as regards interest, which is the focus of this review, the Law Council specifically stated that interest for all EBAs in the form of EBTs should now be treated in the same way as CIS arrangements, that is, the interest for these cases should also be reduced to a rate of 4.72 per cent.
A5.62 All of the above concerns expressed by the Law Council have been echoed in other submissions that have been made to this office. However, most of these other submissions have gone further than the Law Council's suggestion of a reduction in the interest rate to 4.72 per cent. These submissions have argued that that the ATO should apply no interest to any form of EBA as to apply interest is inconsistent with the approach that has been adopted for other forms of mass marketed investments.
Part B: How interest has been remitted to date for EBA arrangements
A5.63 There are four ways in which taxpayers involved in EBAs have received a remission of the interest payable upon the multiple amended assessments that have been issued by the ATO. They are as follows.
A5.64 The rate of interest has been reduced by the ATO as a part of a 'global' decision to remit the interest for most participants in a particular form of EBA. This is what has occurred for 3452 participants in CIS arrangements. In this case, the interest reduction applied to both pre- and post-amended assessment interest.
A5.65 The rate of interest has been reduced for participants based on their individual circumstances. This has occurred in only 3 EBA cases.
A5.66 In some cases, the period for which interest is applied has been reduced for certain groups of taxpayers. This occurred for 1,535 EBA participants who responded to an offer by the ATO to come forward with details of their arrangements by 13 September 1999.
A5.67 In only one case, the period over which the interest has been applied has been reduced because of individual circumstances affecting the particular EBA case in question.
A5.68 Each of these four situations is discussed in detail below.
Situation 1: ATO's reduction of interest in CIS cases
A5.69 In making a reduction of interest in CIS cases the nature of the particular types of arrangement overshadowed consideration of the individual circumstances of each affected taxpayer. The rate reduction was granted to most CIS taxpayers without an examination of the individual facts and circumstances applying to the particular taxpayer's case.
A5.70 The rate reduction was also not applied to other EBAs and therefore was not consistent with the ATO treatment of those EBAs.
Basis for ATO's reduction of interest in CIS cases
A5.71 In material provided to this office and oral statements provided for the purposes of this review, the ATO has indicated that there were two main factors which led to its announced reduction of interest for most CIS cases and not EBAs generally.
A5.72 The first of these was that the Prebble decision indicated that the law in relation to CISs was uncertain. The ATO does not consider that this factor applies to other forms of EBAs.
A5.73 The second factor was that for CISs the ATO had issued a number of advices, all of which were favourable to taxpayers. For other forms of EBA, the ATO has noted that there were either no favourable advices that were issued (for example, for OSS arrangements) or there were both favourable and unfavourable advices issued (for example, for EBT and ESP arrangements).
A5.74 Alternative views on whether these grounds also apply to other forms of EBA have been offered in submissions made to this review.
A5.75 Firstly, submissions have commented that, in the first announcement which the Commissioner made in relation to EBAs, he referred to the possibility that these cases might need to be taken to the High Court for a decision. According to these submissions, this indicates that the Commissioner considered that the law in relation to all forms of EBA was uncertain. These submissions note that this feature of EBAs has been borne out in the history of EBA litigation to date. This history illustrates that the cases decided to date have produced differing results on various tax aspects of EBAs. These submissions therefore conclude that the law in relation to other forms of EBA is also uncertain.
A5.76 Secondly, submissions have noted that the ATO has adopted a tenuous distinction between CIS arrangements and other forms of EBAs where it asserts that CISs only ever received favourable prior ATO advice. These submissions note that the fact that any favourable advices were issued by the ATO in relation to the other forms of EBAs should be a factor for these cases to receive interest remission.
A5.77 The ATO has not offered to CIS cases, or to any other EBA case, the nil interest and nil penalties settlement terms that were offered to the majority of investors in MMTEIs. The ATO does not consider that any of the factors which led it to offer concessional settlement terms, including those relating to interest, to most MMTEI investors apply to either CIS arrangements or EBAs generally.
A5.78 However, as detailed further below, the Inspector-General is of the view that to a large extent the same factors which applied to MMTEI investors also applied to EBA investors, including CIS investors.
Situation 2: Individual EBA cases where the interest rate has been reduced
A5.79 According to material provided to staff of the Inspector-General of Taxation, there are three EBA cases where taxpayers have received a reduction in the rate of interest, apart from the safe harbour cases. There is one EBA case (dealt with below) where the ATO has remitted the interest for a particular period.
A5.80 A number of parties who made submissions to the review have indicated that they would be surprised to learn that there have been any cases where interest has been remitted by the ATO. This is because, in their view, there was a general understanding that the ATO applied a 'no interest remission' policy across all EBAs.
A5.81 The ATO have not, unlike the case of certain MMTEI investors, set up a formal review process for EBA taxpayers to allow interest remissions and other settlement terms for these taxpayers to be considered on a case by case basis. It has also not communicated the existence of any such process to EBA taxpayers. However, such a review process was applied in these three rate reduction cases and the period reduction case referred to below.
A5.82 The absence of an internal formalised appeal process for interest remission decisions also raises concerns that tax practitioners who have established access to the ATO decision makers may be able to achieve better interest rate remission outcomes for their clients.
A5.83 The small number of these cases reinforces the key finding referred to earlier that an internal review process of a structure similar to that adopted for MMTEI investors should also be adopted for EBA taxpayers.
Other comments on interest rate reduction remission processes for individual taxpayers
A5.84 All three cases involving a reduction in the rate of interest involve non-binding ATO advice being given to the taxpayers or their representatives in the form of general correspondence. All of these three cases also involve what the ATO has termed 'arm's length employees'.
Prior advice which the taxpayer has implemented
A5.85 The ATO, in both material provided to the Inspector-General and discussions with staff of the Inspector-General, has indicated that the ATO has considered a remission in the rate of interest applied to an EBA where the taxpayer has received prior advice from the ATO.
A5.86 Such advice could be either in a form which was legally binding on the ATO (that is, a private binding ruling), in a form which the ATO will consider is usually administratively binding (that is, an advance opinion) or in a form which the ATO does not consider to be binding (that is, advice in the form of general correspondence).
A5.87 The ATO's process for dealing with such prior advice was to consider firstly whether taxpayers affected by this advice implemented it in accordance with its terms.
A5.88 Based on a review of the actual files of the cases affected by prior advice, it appears that if any of the following factors were not mentioned in the original ATO advice, but were present in the actual implementation arrangements, the ATO would conclude that the advice has not been implemented in accordance with its terms:
- over 90 per cent of the contributions were made for non arm's length employees associated with the employer;
- the contribution was loaned back to the employer;
- the contribution was lent to entities associated with the recipient employees or to the 'employee' business principals in incorporated 'mum and dad' business arrangements; or
- the contribution represented a salary sacrifice.
A5.89 The three interest remission cases all involved general correspondence. The ATO concluded in all three cases that the manner in which this advice was implemented was in accordance with the terms of the original advice. These cases also all involved arm's length employees.
A5.90 In none of the three cases did the ATO record on its files the actual reasons for the interest remission decision. These reasons had to be gleaned from discussions between staff of the Inspector-General and the relevant ATO decision maker.
A5.91 Based on these three cases, the ATO's current practice for reducing the interest rate to 4.72 per cent in EBT cases of prior non-binding advice is as follows. This reduction will occur where at least the following two factors are present:
- there is prior non-binding advice that has been given to the taxpayer or their representative which has been properly implemented; and
- the relevant employees involved in the EBT are at arm's length.
A5.92 It could be argued that the ATO cannot justify its position of only a partial interest remission being allowable in this kind of case, given that the ATO has admitted that it gave the relevant taxpayers previous advice with which the taxpayers have fully complied. It has been commented that these taxpayers would be justified in thinking that the ATO has applied one standard to them (that is, that they must abide by what they have said they will do) and another to itself (that is, that it does not have to abide by what it has previously said it will do).
A5.93 This observation leads to the following subsidiary findings.
Subsidiary Finding 8
Tax administration would be improved if the ATO, as a matter of fairness, communicated to all EBA participants the existence of prior non-binding ATO advice, including advice provided to an adviser in respect of unnamed clients, may entitle them to receive a partial reduction in the rate of interest.
Tax Office response
A5.94 Where a taxpayer received advice from the ATO in respect of an employee benefit arrangement which was subsequently implemented, that factor was taken into account in deciding whether the interest charge should be remitted. Taxpayers and their representatives have been given opportunities to advise the ATO of the receipt of any advice letters. To date there have been only a very small number of cases in which an arrangement has been implemented materially in accordance with the circumstances outlined in an advice letter.
A5.95 The Inspector-General notes the Tax Office response to this finding. However, a key issue is whether EBA participants or their advisers are aware of this possible ground of interest remission.
Subsidiary Finding 9
Tax administration would be improved if the ATO ensured that in all cases where interest remission decisions are made the reasons for these decisions are appropriately recorded on the file at the relevant time. This procedure would more readily allow these decisions to be the subject of internal ATO review (as recommended above) and also any external ATO review.
Tax Office response
A5.96 The ATO agrees with this finding.
Arm's Length employees
A5.98 The ATO has publicly communicated, by way of a fact sheet issued on 14 March 2003135 that EBAs involving arm's length employees will be considered on a case by case basis. However, this fact sheet does not indicate whether this criterion alone will give rise to any interest rate reduction when it is not coupled with prior ATO non-binding advice.
A5.99 The definition which the ATO uses for the term 'arm's length employee' situation is not clear. The ATO appears to define this situation by reference to what is not an arm's length employee situation. In discussions with staff from the Inspector-General, ATO officers have indicated that a non-arm's length employee situation is one where 90 per cent or more of the proceeds of the relevant trust or fund are ultimately paid out to persons who are associated with the employer who has made the original contribution.
A5.100 Submissions made to this review have indicated that neither taxpayers nor advisers understand how the presence of arm's length employees in an EBA will affect any settlement terms which the ATO may offer for that EBA. The exact meaning of the term, 'arm's length employees' and the possible relevance of this factor has not been clearly set out in correspondence sent to EBA taxpayers.
A5.101 These observations lead to the following finding.
Subsidiary Finding 10
Tax administration would be improved if the ATO communicated directly to taxpayers who are involved in EBAs the extent to which the presence of arm's length employees in their EBAs will lead to different settlement terms. This communication should clearly define the term 'arm's length employees' so that taxpayers who read this ATO communication understand how it might apply to their circumstances.
Tax Office response
A5.102 The information generally available to the ATO does not allow identification of cases involving benefits primarily for arms length employees.
A5.103 As recognised by the Inspector-General, the ATO has publicly communicated that settlement of employee benefit trust arrangements involving primarily arm's length employees will be considered on a case by case basis. Where taxpayers or their representatives consider that their arrangements fall into this category they should contact the ATO.
A5.104 The Inspector-General notes the Tax Office response to this finding. However, a key issue is whether EBA participants or their advisers are aware of this possible ground of interest remission.
Situation 3: EBA cases where interest has been remitted for a period only for all taxpayers in a particular group.
A5.105 As indicated above, there is only one situation involving EBAs where the period for which interest is applied has been reduced as part of a 'global' decision which applies for all taxpayers who meet a certain criterion. This situation is where the relevant EBA participant has responded to the offer by the ATO to come forward with details of their arrangements by 13 September 1999. In this case, the ATO has remitted the interest in full for the period between the time when the taxpayer provided all relevant material to the ATO and the date of issue of the relevant amended assessment.
A5.106 During the course of the review, the principal concern which was raised on this aspect of the ATO's remission policies on interest for EBAs was that, in some cases, the ATO was unwilling to accept that the relevant taxpayer had made a full disclosure within the stipulated time period. These cases were those where taxpayers were unable to provide a relevant document because it was actually in the possession of the promoter of the arrangement. The ATO has denied that this situation ever arose in respect of such safe harbour cases.
A5.107 Another concern was there is or was a lack of transparency in the methods used by the ATO to calculate and then remit this interest. It was suggested that the ATO should, in this specific case and more generally, automatically provide a detailed interest calculation whenever a payment demand notice which includes an amount of interest is sent to taxpayers.
A5.108 The ATO now publishes a fact sheet which outlines the rate of interest applied for all periods since 1 July 1999 which now partly addresses this concern. However, it still does not automatically provide detailed interest calculations unless these are specifically requested. This leads to the following subsidiary finding.
Subsidiary Finding 11
Tax administration would be improved if the ATO were to readily make available a mechanism to allow taxpayers to check how interest calculations have been made. The nature of this mechanism should be determined in consultation with appropriate parties, including taxpayers, tax agents and professional bodies representing tax agents and tax advisers.
Tax Office response
A5.109 The ATO will consider such mechanisms as part of the improvements under the easier, cheaper and more personalised change program.
A5.110 The Inspector-General endorses the Tax Office agreement to address the issues identified and looks forward to further detail becoming available.
Situation 4: Cases where interest has been remitted for a period based on individual circumstances
A5.111 The ATO has provided material to this review which indicates that in only one EBT case was there a reduction in the period during which the ATO applied the interest for underpaid tax. This case was not subject to the safe harbour settlement option. The remission was based on an admission by the ATO that it had delayed in responding to the taxpayer during the relevant period.
A5.112 The Inspector-General has the following concern with this case. A number of submissions made to the office indicate that there have been substantial delays, sometimes up to 18 months, from the time that the taxpayers respond to a Notice of Intention to Audit and the date of issue of the amended assessment.
A5.113 It appears surprising, given the above submissions and the volume of EBA cases handled by the ATO, that this form of ATO delay has given rise to interest remission in only one non safe harbour EBA case.
A5.114 These comments suggest that taxpayers may not be aware that ATO delay is a ground for the remission of interest, even though this is specifically referred to in the ATO's current policy document for the remission of interest.
A5.115 These comments also support the concerns previously noted that there could be a lack of taxpayer and adviser awareness of the ability to seek interest remission based on individual circumstances.
Subsidiary Finding 12
Tax administration would be improved if ATO communications to EBA taxpayers specifically made reference to the fact that ATO delay is a ground for interest remission.
Tax Office response
A5.116 Contrary to paragraph A5.113, the ATO has partially remitted the interest charge in a number of cases due to acceptance that the ATO contributed to an undue delay in issuing amended assessments.
A5.117 Further, after publication of the report we will be communicating with all tax agents explaining the implications, consistent with our response. This will cover remission issues.
A5.118 The Inspector-General notes the Tax Office response, although the ATO was only able to provide documentary evidence in respect of one case.
A5.119 The Inspector-General supports a direct communication process to all tax agents, to assist their communication with their clients, covering interest remission and other matters associated with this report.
Part C: How ATO approaches to EBAs compare with ato approaches to other groups of taxpayers
A5.120 The ATO considers that EBA disputes generally do not warrant the settlement treatment that was granted to MMTEI investors.
A5.121 Details of how the ATO initially grouped EBAs with MMTEIs, but then subsequently distinguished EBAs from MMTEIs are set out below. Also set out below are comments on the ATO's current treatment of EBAs.
ATO's initial characterisation of EBAs as mass marketed disputes
A5.122 The Inspector-General notes that, from the early days of its investigations into MMTEIs, the ATO grouped EBAs with other forms of MMTEI. This practice is confirmed in the Commissioner of Taxation's Annual Report for 1999/2000 where it categorises EBAs as one form of mass marketed scheme.136
A5.123 The ATO publicly de-grouped EBAs from other forms of MMTEI from at least 26 April 2001 when it announced that it would reduce the interest on tax debts for some MMTEIs, which did not include EBAs.
A5.124 However, the ATO's own internal guidelines for settling MMTEIs continued to apply to EBAs after both this date and the date of its no penalty and no GIC offer to MMTEIs. These guidelines were only withdrawn by the ATO on 29 October 2002.
A5.125 There is further evidence which supports a view that the ATO continues to regard EBAs as a form of MMTEI, even though ATO staff have indicated to this office and others that EBAs are not now part of MMTEIs. For example, in an organisational sense, the ATO staff which are responsible for EBAs are also responsible for MMTEI arrangements.
ATO reasons for not applying MMTEI settlement offers to EBAs
A5.126 In the opinion of some parties, the ATO's reasons for not applying its concessional interest rate offer given to MMTEIs to EBAs were not comprehensively stated. What was stated was that these arrangements involved very different circumstances, for example, a high level of investor control.
A5.127 From material gathered during this review, it appears that the ATO's list of grounds for excluding EBAs from MMTEI treatment is as follows.
A5.128 The first ground was that the ATO considered that EBAs generally involved participants who were more sophisticated taxpayers, being people in business rather than wage and salary earners. According to the ATO, these business people generally had a higher level of knowledge of the details of the tax planning arrangements than participants in MMTEIs.
A5.129 The second ground was that, EBAs were not marketed using the same aggressive marketing techniques as MMTEIs, but were tailor made for each EBA participant.
A5.130 The third ground for the ATO's different treatment of EBAs was that MMTEI investors often suffered an actual economic loss in relation to the investment, while this was not the case for EBA investors.
A5.131 The fourth ground offered by the ATO for the distinction is that the taxpayers involved in MMTEIs handed over their funds to outside parties and therefore lost control of them, whereas in EBAs the funds were often provided to entities related to the participating employer or employees.
A5.132 It is possible to take an alternative perspective in respect of each of the ATO's grounds for distinguishing EBAs from MMTEIs.
A5.133 Firstly, submissions made to the Inspector-General have asserted that participants in EBAs comprised the same broad array of participants that were involved in MMTEIs. One submission noted the following in this regard:
'… a broad array of individuals entered into the EBAs ranging from 'sophisticated' investment bankers and corporate executives to the average salary and wage earner, small business operator, 'mum and dad' companies, etc. The investors in the EBAs were not exclusively 'sophisticated investors' and many were like those who invested in the mass marketed schemes.'
A5.134 Secondly, submissions have asserted that EBAs were marketed in a very similar fashion to MMTEIs. These submissions state that, although EBA promoters did not market to employees directly, but rather to their employers, the same kind of sophisticated marketing techniques were utilised to capture this target employer market. These techniques included glossy brochures and senior barrister's opinions.
A5.135 Furthermore, these submissions assert that the manner in which EBAs were implemented did not depend greatly on the individual circumstances of the EBA participant, as the essential features of these arrangements were identical in their broad outline.
A5.136 Thirdly, submissions to this review have asserted that many EBA participants have actually suffered economic loss as a result of their participation in these arrangements. Submissions noted that many EBT taxpayers in particular have been forced into liquidation in order to pay the assessments they have received. Furthermore, the multiple nature of EBA assessments has destroyed the creditworthiness of EBA participants, thereby causing these participants to suffer a loss to their business reputation.
A5.137 Fourthly, these submissions assert that the ATO's view that the funds invested in EBAs remained under the investor's control is arguable as the very nature of EBAs is that legal entitlement to the relevant funds, together with the actual funds themselves in many cases, is passed on to other entities. Professional advisers involved in implementing settlements have commented on the difficulties on some occasions of obtaining the agreement of third parties, such as trustees, to the release of funds held in these other entities.
A5.138 These submissions also point out that, in any event, in many MMTEIs the taxpayers' funds were never applied to the relevant investment, but were used to meet the promoter's fees. The issue of retaining control over the relevant invested funds is therefore not perceived to be as relevant as identified by the Commissioner.
A5.139 In addition, these submissions note that EBA taxpayers incurred significant promoter and legal costs in both setting up their EBA structures and dismantling them in response to ATO audit activity, with the tax deductibility of these costs also being an issue disputed with the ATO.
A5.140 The Inspector-General is in general agreement with the above comments made in submissions received regarding the ATO's grounds for distinguishing participants in EBAs from MMTEI investors.
A5.141 This leads to the following key finding.
Key Finding 7
Taxpayers who are members of groups of taxpayers in dispute with the ATO over arrangements frequently share a range of common features. Some of these features were identified by the ATO and used to determine the final settlement offer that was made to the majority of MMTEI investors. In the ATO's view, these common features suggested the existence of exceptional circumstances which justified applying an interest remission policy which led to the interest charge being reduced to nil.
The present ATO treatment of pre- and post-amended assessment interest charges for taxpayers involved in EBAs has focussed principally on the nature of the arrangement giving rise to the particular dispute. For taxpayers involved in three kinds of EBAs full interest has been charged while for taxpayers involved in one form of EBA a reduced interest rate has been applied.
This focus on the nature of the arrangement in EBA disputes appears to have led to taxpayers involved in EBA disputes receiving interest remission outcomes which are inconsistent with those received by other groups of taxpayers. It has also led to taxpayers involved in certain types of EBA receiving interest remission outcomes which are not consistent with those applied to taxpayers involved in other forms of EBA.
A5.142 The Inspector-General also notes that there is one further factor present in certain EBA disputes which may warrant specific attention in considering whether full remission of the pre-amended assessment interest charge for taxpayers involved in EBA disputes is appropriate.
A5.143 This additional factor applies to EBA taxpayers who were involved in employee benefit trusts, employee share plans and controlling interest superannuation arrangements.
A5.144 For these three types of arrangements, there is evidence of an administrative practice within the ATO of giving favourable advices for such arrangements. Evidence of such an administrative practice is referred to at paragraph 51 of the Federal Court decision in the Prebble case.137 This practice appears to be evidenced by the significant number of favourable prior advices given. This factor was not present to the same degree for MMTEI investors, given that for the over 43000 taxpayers involved in MMTEIs the ATO has indicated that there were only six prior advices.138
A5.145 Conduct of the ATO which has caused taxpayers to be misled is not a factor which is specifically dealt with in Chapter 93 of the ATO's Receivables Policy. However, it was a factor which was specifically referred to by the ATO in its policy documents for the remission of the per annum interest charge for underpaid tax prior to 1 July 1992 and, more recently, for the remissions of the interest for underpaid FBT prior to 1 April 2001. The relevant rulings dealing with each of these types of interest specifically provided that this factor would lead to interest being remitted to nil.139
Tax Office response
A5.146 The focus of Key Finding 7 is the distinction in treatment between mass marketed investment schemes and Employee Benefit Arrangements.
A5.147 Without traversing in detail the views and counter views about our reasons for distinguishing between the two some brief observations are appropriate on some of those. They also help illustrate a broader consideration in making the distinction.
A5.148 The particular economic loss considerations in the mass marketed investment schemes referred to the participant's own funds being invested in, and lost on, what was in many cases a poor or non-existent venture. It was not a reference to losses associated with costs of entering the arrangements, such as promoter fees, or the consequences of facing an appropriate tax liability.
A5.149 Further, unlike the investments in mass marketed investment schemes, the use of the funds in employee benefit arrangements were generally under the effective control of and/or generally for the benefit of the participant and/or associates.
A5.150 The participants set up the structures involved and directed the funds to them.
A5.151 These factors have been recognised in decided cases to date. For example, in Essenbourne the court concluded that the arrangements were designed to distribute profits in a tax free form to the principals of the employer entity.
A5.152 In some cases amounts contributed to employee benefit trusts were loaned back to the employer or associate of the employer. In the Spotlight case, which involved the provision of benefits for arm's length employees, the round-robin loan back arrangement was a factor leading the Court to conclude that there was a dominant purpose of gaining a tax benefit.
A5.153 The Inspector-General states that "there is evidence of an administrative practice within the ATO of giving favourable advice" for employee benefit trust, employee share plan and controlling interest superannuation arrangements. The Inspector-General notes that this factor "may warrant specific attention in considering whether full remission of the pre-amended assessment interest charge for taxpayers involved in EBA disputes is appropriate".
A5.154 The Inspector-General cites the judgements of the Federal Court in the Prebble case as evidence of such an administrative practice.
A5.155 The Prebble case involved a controlling interest superannuation arrangement and the court's decision and comments are not relevant to the other types of employee benefit arrangements. As previously pointed out, we took into account the court's decision in Prebble that the taxpayers claim was reasonably arguable and the issue of a small number of favourable advices in deciding to partially remit the interest charge for most controlling interest superannuation arrangement cases.
A5.156 The circumstances which made it appropriate to partially remit interest in those cases have no relevance to other employee benefit arrangement cases.
A5.157 As previously pointed out, we are of the view that the evidence does not support a conclusion that there was an administrative practice within the ATO of giving favourable advice or accepting the tax benefits claimed in respect of employee benefit trust or employee share plan arrangements which have been the subject of disputes with the ATO.
A5.158 In relation to employee benefit trust arrangements, apart from both the favourable and unfavourable rulings which are the subject of a current criminal matter, the small number of favourable advices issued by the ATO did not cover the circumstances of the typical employee benefit trust scheme involving non-arm's length employees. In our view the typical employee benefit trust arrangement was not a genuine employee retention plan but rather a scheme designed to distribute profits in a tax free form to the principals of the employer entity. As indicated, this view was confirmed by the Federal Court in the Essenbourne case.
A5.159 In relation to employee share plan arrangements, only two favourable advices were issued. This does not represent evidence of an administrative practice.
A5.160 No advices were issued in respect of the offshore schemes.
A5.161 The broader point referred to is this - the acceptance that arrangements of this kind marketed in these circumstances could at worst result in a no-penalty, no-interest outcome would significantly impact on the future health and integrity of the tax system.
A5.162 The Inspector-General has concluded that the ATO's treatment of EBAs has resulted in EBAs, and different forms of EBAs, receiving interest remission outcomes inconsistent with other groups of taxpayers.
A5.163 In responding, the Tax Office has identified a range of factors which it has considered as key points of difference between MMTEIs and EBAs. It has stated that these factors have been recognised in relevant court decisions.
A5.164 These comments by the Tax Office go to the efficacy of EBAs rather than the consistency of treatment of interest remission between groups of taxpayers. The Inspector-General has consistently stated that the efficacy of EBA arrangements has not been a consideration of this review.
A5.165 The Inspector-General notes that the Commissioner of Taxation will be offering EBA taxpayers, as a settlement incentive, an interest cap. The total amount of pre- and post-amended assessment interest accruing to the date two months from the date of release of this report will be capped at 70 per cent of the primary tax in dispute (that is, excluding penalty and interest). The capping will apply irrespective of whether participants continue to dispute the issues in the courts. This offer will also be applied to finalised cases.
A5.166 The Inspector-General is strongly of the view that the overall health and integrity of the tax system is crucial to community confidence and ongoing viability of the system. However, it is noted that the remission of interest and penalty for most MMTEI investors has not seemed to have had adverse consequences to this integrity and that the number of MMTEI taxpayers significantly exceeded the number of EBA taxpayers.
A5.167 The Inspector-General is supportive of the proposal outlined in the Commissioner of Taxation's covering letter (Appendix 1) to implement an arrangement of a senior panel, supported by transparent guidelines, to consider future widely based settlement activities.
Case law — Elias vs Commissioner of Taxation
A5.168 The ATO has, in discussions with the Inspector-General indicated that the Federal Court decision in the Elias Case140 provides judicial support for its current treatment of interest charged to EBA taxpayers. In this case the taxpayer sought judicial review of the Commissioner's refusal to remit the GIC pursuant to the Administrative Decisions (Judicial Review) Act 1977 (the 'ADJR Act').
Facts of Elias' Case
A5.169 In the proceedings, the taxpayer, who had entered into an EBA in the form of a CIS, alleged a number of grounds upon which he claimed the Commissioner had erred in refusing to remit the GIC. Most relevant to the current discussion was the submission to the Court that the Commissioner had treated the taxpayer unfairly because he treated him differently as compared to other types of taxpayers involved in MMTEIs, who received concessions by way of a remission of the GIC.
A5.170 The taxpayer submitted that the failure of the Commissioner to consider whether it was fair that he should be treated in a different way from the participants in those other arrangements meant that the Commissioner breached the principles of natural justice as:
- the Commissioner failed to take relevant considerations into account; and
- the Commissioner acted in accordance with a rule or policy without regard to the merits of the applicant's case.
A5.171 Justice Hely held that the taxpayer had not established that there was any irrationality in treating participants in mass marketed schemes more benignly than participants in EBAs. The Court stated that:
'The media release refers to the two groups, and to the fact that one group will receive more favourable treatment than the other, and explains why there is to be differential treatment between the two. In the view of those who published the media release, the two groups are to be treated differently because members of one may be expected to be more financially sophisticated than the members of the other. It has not been shown that the reason assigned for the differential treatment is without foundations.'
A5.172 The Court concluded that the taxpayer had not established that there was any reviewable error on the part of the decision maker in failing to consider this question. Also, the Court held that the taxpayer had not established that the decision refusing to remit the GIC in the case of the taxpayer was irrational having regard to the terms of the media release. Rather, all the taxpayer had established was that the Commissioner had announced that cases, which in the opinion of the Commissioner are different, would be treated differently.
A5.173 The ATO responded to the handing down of this decision by releasing a summary as part of its information sheet outlining the decisions supporting the views taken by the Commissioner. In respect of the Elias case, the information sheet provided that:
'The Court held that the decision was reasonable and was made within the Commissioner's discretion.
The Court also held that there were good reasons put forward for discriminating between taxpayers involved in mass marketed schemes and those involved in employee benefit arrangements.' 141
Inspector General's view
A5.174 The following general comments are offered in respect of the Elias case.
A5.175 Firstly, the Elias case deals with the remission of post-amended assessment interest and the judicial review of the Commissioner's refusal to remit that interest. The Court made no specific comments regarding the remission of interest for the pre-amended assessment period, which is the focus of this review.
A5.176 Secondly, the Court in Elias was only examining whether the conduct of the Commissioner amounted to a reviewable error in accordance with the ADJR Act. Such a review does not examine the merits of the decision made by the Commissioner or the merits of the opinion held by Commissioner.
A5.177 There will be instances where a taxpayer is not able to establish that there was a reviewable error on the part of the decision maker. However, this does not necessarily mean that the merits of the decision are in accordance with good administrative practice and consistent with the principles of equity and fairness.
A5.178 In analysing this decision and the views expressed by the Court the distinction between judicial review pursuant to the ADJR Act and a merits review is important.
A5.179 The description by the ATO in the information sheet on its website that the Court 'held there were good reasons put forward for discriminating between taxpayers involved in mass marketed schemes and those involved in employee benefit arrangements' appears to blur that distinction and may cause some confusion as to view taken by the Court. At no time did the Court make any comment as to merits of the opinion held by the Commissioner in differentiating between these groups of taxpayers. In fact, a consideration of the merits would be outside of the powers of the Court under the ADJR Act.
118 Australian Taxation Office, Media Release Nat 99/16, dated 19 May 1999.
119 Commissioner of Taxation, 'The Changing Landscape for Financial Planning', Lunchtime Address to Financial Planning Association of Australia, Melbourne, 27 April 1999.
120 Taxation Ruling IT 2500, at paragraph 14.
121 Australian Taxation Office, Media Release Nat 99/12, dated 26 March 1999.
122 Australian Taxation Office, Media Release Nat 99/16, dated 19 May 1999.
124 Australian Taxation Office, Media Release Nat 99/46, dated 13 August 1999.
125 ATO Minutes No: IGT07-2004, IGT08 -2004 and IGT10-2004, all dated 30 January 2004.
126 Walstern v FCT  FCA 1428.
127 Spotlight Stores Pty Ltd v Commissioner of Taxation  FCA 650.
128 Kajewski v FCT (2003) ATC 4375.
129 Essenbourne v FCT (2002) ATC 5021.
130 Harris v FCT (2002) ATC 4569 (Full Federal Court), and (2002) ATC 4017 (single judge).
131 Prebble v FCT  FCAFC 165 (Full Federal Court) and Prebble v FCT  FCA 1424 (single judge).
132 Walstern v FCT  FCA 1428.
133 Australian Taxation Office, Media Release Nat 03/30, dated 14 March 2003.
134 A copy of this statement was provided to the Inspector-General by the Law Council on 6 January 2004.
135 Australian Taxation Office, Fact Sheet 'Employee Benefit Arrangements' (EBAs) Nat 8097-3.2003.
136 Commissioner of Taxation's Annual Report 1999-2000, at page 70.
137 Prebble v FCT (2002) FCA 1434.
138 ATO Minute No: IGT 14-2004.
139 Taxation Ruling IT 2517 at paragraphs 37 and 41; Taxation Ruling TR 95/4 at paragraph 18.
140 Elias v Commissioner of Taxation (2002) FCA 1132.
141 Australian Taxation Office, 'Court decisions in scheme cases, which weren't mass marketed', Information Sheet, 8 December 2003.