KEY POINTS:
Tax cheats who try to lower the amount of money they pay by using trusts or companies have been put on notice.
Inland Revenue yesterday issued an alert, saying they should beware.
Graham Tubb, group tax counsel, said IRD had an issue with people who diverted money into an entity like a trust or company to take advantage of a lower tax rate. "We acknowledge that there are legitimate business reasons for using such entities," Tubb said.
"But some cases contain common features which would encourage us to look at them further. These features include the entity employing the person for either no payment or payment at an artificially low level and a redistribution of the entity's income to the person or to family members."
Income diversion could also have the effect of reducing child support liabilities or student loan repayments and allow people to become eligible for credits and allowances, he said. "We will continue to investigate these arrangements and where necessary take steps to counteract the tax benefits obtained," Tubb warned.
Greg Haddon, a tax partner with Deloitte in Auckland, said:
"IRD has not been very clear on what sort of level of salary they would permit to be moved into a trust or company."
