Further to my entry back in June WE’RE UNDER FORMAL REVIEW BY THE ATO AGGRESSIVE TAX PLANNING UNIT & WE COULDN’T BE HAPPIER!, we’re delighted to announce that yesterday (24th August, 2010), we received a letter from the ATO confirming the formal review into the possible application of the promoter penalty laws to our businesses was concluded and presently that in respect thereof, no further action is required on their part. To be clear, the purpose of the formal review was so the ATO could assess any risks Deduct Your Home and it’s sister business for professional adviser use (BetterLifePanel), posed to the community under these laws as contained in Division 290 of Schedule 1 to the Taxation Administration Act 1953.  The promoter penalty laws exist specifically to deter or punish promoters of illegal tax exploitation schemes (i.e. the name  collectively given to illegal tax avoidance and tax evasion schemes) and which confer upon  the Commissioner,  the power to seek  voluntary undertakings, statutory or civil injunctions and or civil penalties through the courts against the promoters of any such illegal schemes.

Reproduced below in italics is an excerpt from that letter (with confidential ATO contact and other non pertinent details removed):

24 August 2010

Risk review – finalisation letter

Dear Mr Genovesi,

We have completed the risk review to establish any possible risks under the promoter penalty laws.

There is at present no recommendation for Aggressive Tax Planning to undertake the compliance function of a civil investigation as outlined in Practice Statement PS LA 2008/7; however, this does not preclude Aggressive Tax Planning from undertaking this function at a future time.

As you may know, the many and various existing ATO Practice Statements are the Commissioner’s formal and obilgatory internal  procedural directives to his subordinates on how they must conduct certain functions. Accordingly, Deduct Your Home has drawn the nexus for you from the above reference to Practice Statement PS LA 2008/7, to its relative and authoriative paragraph 47 of which we’ve taken the liberty to reproduce below in italics for your convenience.

Making a recommendation regarding promoter penalty action

47. If active compliance work indicates that prohibited conduct has occurred, Promoter Compliance staff should make a written recommendation about promoter penalty action to an appropriately authorised decision-maker (see paragraph 48 of this practice statement) for the promoter penalty laws. This recommendation should summarise the available evidence and outline the relevant factors in favour for and against the recommendations made.

For those wanting to read PS LA 2008/8 in its entirety, please open a new window and simply copy and paste the following URL into your browser:

http://law.ato.gov.au/atolaw/view.htm?DocID=PSR/PS20088/NAT/ATO/00001

Of course the ATO has not locked our file and thrown away the key as it is entitled and what’s more expected, to  respond to any  new developments that may one day arise in so far as our possibly posing a compliance risk to the community (the same as for any business really) and to which we’re  unopposed as it would be doing the right thing. However to faithfully consider the extraordinary lengths we’ve gone to over the last five years or thereabouts, just in proving our goodwill  to the community, means you should now  have no hesitation in explicitly trusting in our committment to our core values and how that means we’d never throw our hard earned accomplishments and associated self-respect away by stupidly morphing into an illegal operation.

The fact is that we we’re never in doubt and that all in all and despite this formal review having taken four arduous months and sucking a lot of oxygen out of the tank, hell-yeah … it was worth every bit of the pain just to finally get it in writing.

We also take this opportunity to remind you  that in February 2009 at our specific request, the Commissioner examined  our arguments and motives before deciding in accordance with established protocol under PSLA 2008/4, to assist our efforts to keep our intellectual property  from the public domain (additionally as contained within the materials more recently submitted during this past formal review). This was done via the process of vastly editing the IP out of our private ruling as destined for publishing in the register at www.ato.gov.au. Of note, PSLA 2008/4 states that information already in the public domain cannot be confidential hence we therefore ask you to consider that on this very reasonable basis,  it’s absurd to suggest the Commissioner would not know what is and isn’t already in the public domain in regards to tax related matters as put before him for intense scrutiny and comment at a highly technical level. Accordingly, we take this definitive action as a very strong show of support that the IP is indeed ours (and as verbally admitted to us on 28/06/2010 during a formal recorded interview) and despite the ATO not being in the business of formally acknowledging or granting IP rights (that’s IP Australia’s role with whom we’ve had significant other dealings in obtaining three registered trademarks).

Consequently, you can now  conduct your business with us in full confidence that as the undisputed pioneers of our field and in total contrast to mainstream professional thinking and to our considerable knowledge, we are Australia’s only firm that understands the  truth and the magnitude of  this incredible opportunity now at hand.

We further remind you that we’ve set in place for your immediate consumption, a tantalising menu of client-ready, turn-key “Procedures ” ensuring you’ll get your fair share of the good stuff.

When considering our proposal for your betterment, the abundance of evidence we’ve gathered as we’ve gone about our business of securing Australia’s highest authorities (i.e. The Government’s and the ATO’s), various levels and modes of confirmation of our unique position and our claims to the market, means that noone else comes close.

Make It Good Debt!

If you open the financial section of any newspaper or watch or listen to the financial news, read business portals online or allow yourself to be purposely exposed to other form of business and financial media and if you pay any attention at all to the constant advertising bombardment that your eyes and ears are subjected to every day just watching or listening to ordinary commercial tv and radio, then you may agree that we our drowning in a sea of complex information and enumerable claims and offers on how to create wealth and improve lifestyle and yet, there is more risk and ambiguity than ever before. The gap between the rich and the average is ever-widening whilst the poor old “poor” barely get a look in!

Stop wasting time with those who obviously don’t know how to help you to save thousands every year on unavoidable, home expenses.

Make It Good Debt!

After I conducted thousands of appointments in personal practice as a financial planner, I founded Deduct Your Home  on the underlying principle that it’s wrong for you to give up your “power” to someone else, just because they specialise in something.

I say YOU must always be in control i.e. the one to “call the shots” and that knowledge and perhaps even more importantly, perspective, are the keys to intelligently and effectively wielding that power.’

By this I mean that of course you don’t have to know everything your advisers know about how to do their jobs and nor would you want to but as the “BOSS”, you do need to remember that everyone works for YOU and that’s why you need the vantage point of overall perspective, to ensure you always know what it takes to succeed at every turn and whether or not everyone on your team is doing their part as necessary!

Naturally in setting you up to save tax, build wealth, retire more comfortably, live a better lifestyle, enjoy a nice home in a better area and more, you won’t want anyone making strategic or procedural mistakes and so perhaps for the first time in your life and in a relevant manner of speaking, our system fairly and squarely puts you  in the driver’s seat!

Make It Good Debt!

Hello and welcome back!

Further to my last entry THE ATO REALLY SHOULD MAKE OUR PRIVATE RULING AND NOT COP OUT LIGHTLY!, last December, I managed to obtain a very warm inside referral from the manager of high net worth, private client wealth planning of one of the big four banks (hint it’s got three letters – well so do three of the four but that’s all I’ll say). It was later agreed to check us out in relation to our home-business Procedures etc. Having sent detailed presentation materials which clearly spell out very plausible possibilities for millions of clients and of which the bank could not currently understand how to accomplish absent my explanation (e.g. how to; save thousands every year in tax, save thousands every year in property expenses, build significant personal and business wealth, retire better off, live in a nicer home in a better area etc); I am bemused that my further emails and telephone calls remain unanswered. Perhaps it’s just my natural tendancy to want to be well-informed on breaking matters of paramount interest that would have me wanting to know as a major player in the Australian financial services landscape, just exactly what it is that some small-fry, smart alec like me thinks he knows (if anything)! I’m not taking it badly though as in this day and age, to have even obtained such a powerful opportunity to present is rare at best so on that front, some might say “I done good”. I wonder if I should make contact one more time (once I have that anticpated green light from the ATO in writing in about a week).  Hhmmnn???

Furthermore and over the last month or so, I’ve been dealing with another of Australia’s oldest and largest financial services organisations (definitely another three letter household name but strictly speaking, not just a bank), hoping to do a deal to roll out our Procedures en’ masse via a national network of nearly 1300 financial planners. Again I recently provided a detailed powerpoint presentation on the many merits of so doing etc however just this Thursday,  I received a call from my contact within, to explain that my offer to explain my IP in detail (under cover of our standard confidentiality deed), had been declined as the the conservative giant whale was just too afraid of being such a big target for the ATO (assuming there were unsettled tax issues). I briefly said they had it all wrong but to no avail.

These two cases alone illustrate that the larger the ship, the harder it is speak to the captain and to steer the damn thing – I’ve always known this but have lived in hope nonetheless.

It would also appear that there’s a distinct lack of desire amongst the heavyweight Australian financial corporates, to even want to know the nuts and bolts of  if and how all this “stuff” works before deciding that it’s not for them. I find it all very disenchanting when I think of the enormous databases of clients who may never get to learn of the amazing options that are now available to them.

Indeed I wonder if the “best interests” of clients of these oranisations ever really get a look-in as when the status-quo is one of continuing to earn record profits, what becomes apparent is  “if the wheel ain’t broke – don’t fix it”!

It’s a crap attitude I know so I’ll just keep on keeping on to help my fellow citizens; even if one at a time then.

Nothing wrong with that!

Make It Good Debt!

Further to my last entry ASIC (OUR FINANCIAL SERVICES REGULATOR), IS SATISFIED WITH US! , hmm, let me see. About mid April I think it was, I received a call from The Director, Aggressive Tax Planning Unit (The Director). She was somewhat concerned about some statements on another web site I still have running in connection with all this and reckoned I was effectively saying that my business is “endorsed” or “approved” by The Fed Govn’t and the ATO whereas she also stated that the ATO’s policy is NOT to approve or endorse any business. Well I stuck to my guns saying I strongly disagreed as I had written confirmation from The Fed Treasurer that The Fed Commissioner of Taxation had suggested I might invite my future clients to do a particular thing in relation to getting the Fed Government’s assurances in connection with purchasing my company’s information product and implementing its content into their own lives and hence how that amounted to approval for my company to market its goods in this certain manner. She was adamant and said that if I didn’t comply with her requests, she’d refer the matter to the Australian Competition and Consumer Commission (ACCC), for further investigation. I implored her to seek competent legal advice as I thought it would be in everyone’s best interest that her unit was professionally appraised of the situation rather than continuing to seemingly make it up as she went along in areas of which it equally appeared that she was neither qualified nor competent (she’s an ATO investigative officer and not a commercial litigation lawyer after all)! I also told her that I had no problem with her going to the ACCC if that’s what she wanted to do other than that I thought it would be a waste of her time and energy as I knew I had no case to answer in respect of Section 52, The Trades Practices Act 1974 (Cth) [Misleading and Deceptive Conduct}.

After sleeping on the matter and because I value our good relationship which has ensued over several years of close interaction in obtaining a bunch of awesome private rulings in the course of developing my company’s offering of intellectual property and knowing I wasn’t obligated to do anything, I made some changes just to please her and I ‘m happy to have done so as a bit of give and take in this world is a good thing – don’t you agree? Anyway, I’ll be totally revising that site soon and gearing it solely to the professional adviser market.

Getting back, well, I’m sure you know how it is. One thing leads to another and all of a sudden it's April 21st 2010 and I'm sitting at the tax office in a small, bland room with no pictures on the wall, for an informal discussion or so I thought and it’s just them and yours truly but then it kind of changed into something else but I’ve gotta say – I didn’t mind it at all and to be honest – I enjoyed it. They’re very nice and polite people with an important job to do and they’re not evil – a major pain in the arse yes because that’s the process – but definitely not evil! You see, deep down, you know if you’re a crook or a scammer or whatever you think it is that you really are and I guess that’s why I didn’t mind being there although it’s not like I don’t have other things to do.

Low and behold, the very next day on 22nd April 2010 I had a brainwave so I emailed the Director and asked that given her title "Director, Promoter Compliance | Aggressive Tax Planning" if she'd advise me if and how the Promoter Penalty Laws impacted my business as I simply thought this was in the best interests of all concerned (i.e. The ATO, my business and its intended future clients and partners).

Take a look here to see the email I sent (name withheld for legal reasons) ...

From: Frank Genovesi [admin@betterlifepanel.com.au]

Sent: Thursday, 22 April 2010 11:49 AM

To: “Name Withheld”

Subject: Promoter Penalty Rules

Dear “Name Withheld”,

Given your title; Director, Promoter Compliance | Aggressive Tax Planning, lucky for me, you’re probably the right person to advise if and how the PP rules impact upon my business (emphasis added), as I’ve been meaning lately to write in on this one anyway!

Having closely studied them several times, I can’t see how they can apply but in case I’m wrong, consistent then in my proactive nature to compliance, I’d rather be the one to bring it up at this early juncture rather than cause any damage (remember the facts are as I said yesterday that no one has taken me up on anything yet). Hence; your  timely reassurance in this matter would be most appreciated.

I’ve briefly outlined my reasoning below in an effort to assist in making your own determination (emphasis added):

1.                  No Product Ruling exists or is otherwise contemplated that could allow any “scheme” to be implement in a materially different way.

2.                  The Commissioner has already ruled (four times actually) that my scheme, the subject of mine and my company’s various PBR’s, are not subject to Part IVA given the sole or dominant purpose is NOT to obtain a tax benefit but rather, lifestyle benefits.

3.       My PBR application’s description of the scheme clearly explained that private and business areas of a home are to be exclusively or almost exclusively set aside and used as such (not for mixed use).  Accordingly, the FCT effectively ruled that no private expenses of the family were being claimed as business expenses  under the scheme so why would the ATO go to the considerable trouble of attempting to manufacture an interpretation of  this to mean something else than what it is i.e. the literal truth. As such, it renders oxymoronic, any further suggestion on its part of any semblance of tax avoidance etc.

4.       Points 2 & 3 provide undeniable “Authority” from the ex-chief tax counsel who is now the FCT that no tax evasion, tax avoidance or tax exploitation etc is at play within the scheme.

5.       I requested The Federal Treasurer to consult The FCT and to revert to advise how I may give certainty to my clients. Twice now, The Federal Treasurer has written to say that after speaking with The FCT, that my clients can submit PBR  applications on how the tax law applies to their circumstances in relation to my scheme. I think this is a WHOPPING BIG GREEN LIGHT to commence promoting the scheme in this manner and that is what I’m doing (albeit I am currently attempting to swiftly negate your other concerns as discussed yesterday). Consider that as such, every client will be advised to only commit to the scheme if they firstly obtain a favourable PBR using our template PBR applications. In effect therefore, this is not a mass-marketed scheme as everyone’s PBR will turn out a little different here and there because there is no “settled scheme” as the FCT rightly pointed out when denying me a Class Ruling. Furthermore, applying the template to anyone’s circumstances is quick and easy and therefore prodigiously cost-effective. I’d really love to know how to make things any smarter or safer than this for the average Australian resident for tax purposes, who does not have an in-house tax lawyer at their disposal or otherwise within their budget on any basis, as do many high flyers!

6.       Being that we have tried and are still trying to recruit advisers to work with us in promulgating The Procedures to their clients, they should not fear the rules if also seen to be a promoter to their clients or to their business networks.

Kind regards

FRANK GENOVESI DIP FS (FP)

FOUNDING EXECUTIVE DIRECTOR

Not yet having being informed one way or the other, I wrote to The Director again on 18th May 2010 to suggest that should she be duly suspicious of my business as being the promoter of an illegal tax exploitation scheme, that she had in fact had an obligation to act on the matter under point (17) of the ATO internal guideline PSLA 2008/7 however if she felt this wouldn’t be necessary, to put that in writing please.

On 02nd June 2010, I was advised in writing by the ATO that it would be conducting a “formal review”, the purpose of which was to establish any possible risks under the promoter penalty laws (PPL), administered by the Tax Office.

Of note; over the years as well as recently, I’ve written to the ATO on numerous occasions to invite them to visit my business premises (located within my home) and to do all things they consider necessary including inspecting files and documents, taking photos, making audio or video recordings etc, to satisfy themselves of the legitimacy of the operation.

With a bit of luck it will all be over soon and I can then get on with business as usual and get the “monkey off my back” (as the saying goes).

Make It Good Debt!