Been badly bitten?

[JFEWSTER]

On a previous post, Geoffw stated that he had been very badly bitten by the A.T.O.

I'm not sure whether Geoffw would like to share with us what
went wrong but maybe there are others that have a story to tell that would help newbies like myself "get a feel" for how bad things could get with the A.T.O.

I ask this question not because I want to stretch the rules in any way, but because I once got some very wrong advice from a tax agent which, whilst not gaining me a large financial advantage, could have resulted in a large payback bill (not a lot of money but unaffordable in my circumstances) due to the number of years I had been claiming it.

Without being too specific, it was regarding apportionment rates on shared propery, an area where its difficult for the ordinary person to know what are acceptable boundarys.

How sympathetic/nasty can they be?

Do they give you the benefit of the doubt if you received wrong professional advice -especially when you tried to do the right thing- or is it a case of "your wrong- pay up- and heres a large fine to boot".

I guess you could call this a "risk management" question.


Regards.

 

[geoffw]

Thanks for the opportunity!

I've actually been asked about this privatelt by another forum member who's been bitten, so it's possible there are others. This is not directly property related though.

I invested, on the advice of a financial advisor, in a Tea Tree growing scheme. I researched it pretty thoroughly, and sought independant advice. Everything was positive, so I went ahead.

The setup was that half of the finance was paid now (or in several months time); the other half was to come out of future years' profits. I could claim the full amount of the loan against my tax; when I received a refund, that went to the tea tree people.

I claimed $80K (as advised); I received a tax refund cheque for $40K, and sent off $38K to the tea tree people. So I had (I thought) a good long term investment which had not cost me.

Four years later, the deduction was disallowed. I had to pay them $40K- plus interest and fines- $53K all up.

Interest was accruing as 13%- so I borrowed against my house to pay.

But- the 13% to the ATO was deductible- I didn't realise that the interest on my borrowings to pay ATO was not.

And then the ATO reduced the interes rate to 5%.

Last year, the ATO partially backed away. They offered to allow the cash part of the investment as a deduction ($40K in my case), and to waive fines and iterest. In return, I signed that I would not take, or benefit from, any further action. And I had to sign the offer fairly quickly. As there was a case which had a direct bearing on my investment being appealed, it was a tough call. It was a double or nothing though. If I ignored the offer, I might end up getting nothing back. Or all of it.

I had invested in two subsequent years in a winery on a similar basis. If I had not accepted the offer, and the cort case went against me, I could have lost my house. By accepting, I will still owe them a substantial amount- but I have two years to pay, interest free.

I hope that answers the question!

 

[luckyone]

Hey Geoff,
So have you finished paying this all off now? Hope it all worked out for you.

 

[geoffw]

Hey Geoff,
So have you finished paying this all off now? Hope it all worked out for you.

Yes, I paid off everything- and moved on.

I learnt a lot from that. Primarily, don't stuff with the tax office.

And secondly, I learnt to do without a lot of doodads for some time. (Though I do resent having had to take my children out of a school which was doing them a lot of good).

 

[julia]

If the tax office behaved reasonably we would not have needed an enquirery into how they treated people who relied on ATO rulings from Nick Poutoolios (something like that) when he worked for the ATO then the the ATO sacked him, took him to court, lost but still reniged on his rulings and taxpayers lost their houses.
I have been waiting a year for them to answer a private binding ruling. They have even written to me saying they are not going to answer it because they would have to give a positive answer and they don't want to. So it is not as if taxpayers have an opportunity to find out right from wrong. The PBRs have got so bad the government is about to legislate more rights for taxpayers to get answers.
The ATO are not nice but bullies need to be made accountable not encouraged.
The bottom line is if you got wrong advise and you can prove it, the ATO will still hit you but you can recover any penalties from the tax agent if you can find him. What bugs me is tax agents hold the can and the ATO refuse to answer questions on how they are interupting the law.

Julia Hartman
[email protected]
www.bantacs.com.au

 

[Jamie]

I have been waiting a year for them to answer a private binding ruling. They have even written to me saying they are not going to answer it because they would have to give a positive answer and they don't want to.

Hi Julia,

You have a letter from the ATO saying that you are right and they are wrong, but they dont want to admit it?

Jamie.

 

[duncan_m]

If the tax office behaved reasonably we would not have needed an enquirery into how they treated people who relied on ATO rulings from Nick Poutoolios (something like that) when he worked for the ATO then the the ATO sacked him, took him to court, lost but still reniged on his rulings and taxpayers lost their houses.

From

http://www.smh.com.au/articles/2002/07/17/1026802711183.html


A former Australian Tax Office (ATO) first assistant commissioner, Petroulias allegedly ensured favourable outcomes for tax minimisation schemes promoted by his private company while rival schemes received unfavourable rulings.


So I think there's shades of grey here..

 

[NickM]

I heard that Nick Petroulis is back in court on Mon 14th Feb.
My understanding is that ATO will not let this one go easily.