DESCRIPTION
The taxpayer establishes an offshore structure, or uses an existing structure, in a tax haven or country with bank secrecy with the assistance of a promoter. The promoter may provide a 'paper trail' of documents designed to conceal the true nature of these transactions and the taxpayer's interest in the offshore structure. 2. The offshore structure may include one or a combination of the following types of entity, which are promoted on the basis of not being subject to attribution under Australia's anti-deferral regimes: a) An offshore trust, including bare, blind or discretionary trusts; b) An offshore company, including tax haven entities known as international business companies; c) Another type of entity, including Anstalts or Stichtings. 3. The taxpayer claims to obtain goods or services at an arm's length price. This occurs through a re-invoicing arrangement via the offshore structure. 4. A typical inbound re-invoicing arrangement involves: a) An agreement for a third party to provide to the offshore structure goods or services at market value; b) An agreement for the taxpayer to obtain the same goods or services from the offshore structure at a price substantially above their market value. 5. In extreme cases, no goods or services are provided by the offshore structure, and no third party may actually be involved. 6. The taxpayer claims deductions for the goods or services allegedly provided by the offshore structure. The deductions claimed are higher than if the goods or services (if any) had been provided at market value directly by a third party. 7. The offshore structure accumulates the profits on the price differential. 8. The taxpayer may access these profits, often in a disguised form. 9. The taxpayer does not disclose their involvement with the offshore structure and does not pay Australian tax on the profits accumulated in the offshore structure or when they access those profits. 10. In some arrangements, the documentation supporting the above transactions is absent, incomplete or falsified and the valuations used may be highly questionable. In addition, such documents do not disclose the Australian resident's interest in, or involvement with, the offshore structure.