There is an old saying that ‘if it looks like a duck, swims like a duck and quacks like a duck, then it probably is a duck’. The same concept should be applied when assessing the merits of a scheme or transaction where the objective is to avoid tax.

Don’t get me wrong, none of us want to pay more tax than we need to and it’s our job to make sure our clients don’t pay any more than they are legally obligated to. But if I had a dollar for every time I heard someone explaining an amazing tax strategy starting with “ a friend of mine told me ….” or “my friend’s accountant said ….” I would be a very rich man.

The reality is that the tax system has become far more thorough and the ATO far smarter in identifying and closing down any ‘loopholes’ that cost them revenue. That isn’t to say there is nothing that can be done to legally minimize your tax obligations, but care needs to be taken when assessing any opportunity that excessively or aggressively avoids tax.

In assessing these opportunities, I think the ‘smell’ or ‘duck’ test is a pretty good place to start. If something simply seems too good to be true it usually is. If it doesn’t ‘smell’ right that’s probably because there is something wrong with it. This simple filter can save you time, money and anxiety down the track but if you still have doubts then that is what we are here for.

Just remember that just because someone does the wrong thing and gets away with it doesn’t make them smart. In the world of self-assessment, it doesn’t take a genius to not declare income or incorrectly claim a deduction. If they get away with it, they are fortunate but in my experience that sort of luck always runs out and the consequences when it does far outweigh the original benefit.

So whilst we encourage everyone to ensure they don’t pay any more tax than they need to just take care to not avoid paying the tax you should. If it helps you feel better about it just think of the schools, hospitals, social security system, roads & rail it helps pay for and that are integral to making Australia the country we are always happy to come home to.

Written for you by Gavin Jones