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05 Sep 12 ATO address: The promoter penalty regime

On 17 May 2012, Aggressive Tax Planning Assistant Commissioner, Bruce Collins, gave an address entitled "The promoter penalty regime - How the ATO is applying it in practice" to The Tax Institute's Annual Tax Forum, held in Sydney, New South Wales.

In relation to the "advice exclusion" in the promoter penalty laws, Mr Collins said:

"Many entities that provide advisory services contacted by the ATO have had the false impression that advisors can never be subject to these laws. This has meant that they have not recognised the risks from the positions that they take on arrangements with which they are involved, the methods they use to charge for their services on those arrangements and, often most importantly, the types of conduct in which they engage in relation to those arrangements.

As suggested above, by putting forward an overly positive view of a position for an arrangement, an entity may move from 'merely' providing advice to marketing or encouraging that arrangement. This can result in the entity (or another entity) being a promoter of a tax exploitation scheme, where the other elements of these laws are present. This gives rise to questions of whether the service to the client/s is 'balanced and independent' advice or has moved to a more entrepreneurial mode (which was the historical context for the introduction of these laws)...

The most central issue in the promoter definition is the requirement that there be acts of marketing or encouragement of an arrangement, which is not a normal characteristic of a balanced and independent advisor. Therefore, where an entity moves from the mode of providing balanced and independent advice to actively marketing or encouraging an arrangement, they may create promoter penalty risks for the advisory firm and specific advisors. The ATO has seen instances where this has occurred both from the beginning of an engagement for a client, but also instances where the initial engagement was to provide advice to a client, but gradually shifted into marketing or encouraging an arrangement to that client or even to potential or actual customers of that client."


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