ATO crackdown on structured products
The Australian Taxation Office (ATO) is cracking down on structured financial products which claim to offer franking credits and other tax benefits.
The ATO crackdown, timed to the end of the financial year, has seen the Commissioner for Taxation, Michael D'Ascenzo, warn of the dubious legality of many such schemes.
Further, he said an ATO taskforce was currently contacting the entities marketing and facilitating the arrangements.
"These complex highly-structured investment products claim to offer investors exposure to a portfolio of listed securities but use a derivative instrument, such as a swap to direct the cash dividend to a counter-party, while attempting to retain the benefit of franking credits on the dividends," he said.
The Tax Commissioner said franking credits were only available under the law to the true economic owners of the shares in the company - not those who disposed of the risks and benefits of owning the shares.
D'Ascenzo said the income tax legislation contained specific measures to counter practices that undermined the imputation system, including integrity rules and a general anti-avoidance provision to stop abuse of the system.
He said the Australian Securities and Investments Commission (ASIC) had been alerted about the marketing of the schemes.
Recommended for you
Shaw and Partners’ new national head of private wealth believes the biggest challenge for financial advisers right now is being able to deliver efficient advice delivery amid a complex regulatory environment and growing investment universe.
Global equity manager Orbis Investments has appointed a head of marketing from Capital Group as it becomes the latest manager to target advised retail investors.
While Australia prepares for the $3.5 trillion intergenerational wealth transfer, a Wilsons Advisory report suggests the ongoing gender imbalance in the advice profession could prove a challenge to this process.
Danielle Press, a former ASIC commissioner, is to chair a new AFSL committee set up by Sequoia which seeks to improve governance practices and review its approved product lists.
