Previously the ATO had revealed that in March 2014 3,000 letters had been sent to taxpayers who the ATO suspected of being involved in a dividend washing arrangement. Of these 3,000 original letters approximately 1,300 have “responded by coming forward to make voluntary amendments under which the franking benefits obtained from dividend washing transactions have been removed from their tax returns”.
Now the ATO will be sending letters to 500 of these taxpayers who did not respond to the first letter, along with letters to a further 1,500 based on “updated data analysis” by the ATO. These letters will “ask those taxpayers to self-amend their tax returns in order to reverse franking benefits they may have obtained from dividend washing transactions”.
The ATO says that penalties will not be imposed “on taxpayers who have entered into dividend washing transactions and who come forward to self-amend their tax returns before the date specified in the letter they receive from us”.
Taxpayers who haven’t received a letter from the ATO, but who were involved in a dividend washing arrangement “will not be subject to penalties provided they amend their tax returns by 22 September 2014”, says the ATO.
Dividend washing involves an arrangement where a taxpayer receives twice the normal amount of franking credits on a parcel of shares by entering into a transaction on a special market, and has been a concern of the government and the ATO since at least 2013 due to the reduced tax receipts.
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