The Australian Tax office published a media release on December 22nd 2009 regarding Sham Mortgage Arrangements. This may be especially relevant now during the financially tight post-Christmas months. Since mortgage repayments are a significant financial burden, scams that promise to help pay them off faster can be very attractive.

ATO advises that under normal circumstances, home loan repayments, and their relative interest, are not tax deductible. Therefore, any scheme promising to avoid interest, through refinancing and third party investments, will face close scrutiny and hefty fines from the ATO.

“These arrangements are essentially about people refinancing their home loan and establishing what appears to be an investment loan to fund the purchase of shares in a bogus company,” said Mr D’Ascenzo, the government Tax Commissioner.

D’Ascenzo also commented that the ATO is contacting 140 people already involved in such arrangements, and urging anyone else to come forward. People that voluntarily contact the ATO before they get audited will be entitled to a reduction in any penalties that may otherwise apply.

You can contact the ATO for more information about this matter on 1800 177 006.
Alternatively, visit the media release on their website at ato.gov.au.