DESCRIPTION
An Australian resident taxpayer establishes a Liechtenstein legal structure (the structure), or uses an existing structure, usually with the assistance of a promoter. The promoter may provide a 'paper trail' of documents that do not reflect the substance of these transactions and the taxpayer's interest in, or involvement with, the structure. 2. The structure involved will typically include: a. An Establishment (Anstalt), b. A Foundation (Stiftung), and/or c. Other legal structures, such as Liechtenstein corporations 3. Under the by-laws and other constituent documents (such as agency agreements), the promoter operates the structure on behalf of the taxpayer and acts as the structure's representative. 4. The taxpayer directly or indirectly transfers assets to the structure, although such transfers may be revocable by the taxpayer. The assets may include cash and investments in term deposits, bonds or equities, which may themselves consist of undisclosed income or gains, and the actual transfer of the assets may give rise to undisclosed income or gains. 5. The structure then uses the assets to generate passive income, which is retained by the structure. The taxpayer and/or their associates ultimately reap the economic benefits from the structure, often in a disguised form. 6. The structure may be used as a holding company for other entities in which the taxpayer has an interest. 7. The taxpayer does not disclose their involvement with the structure and does not report for Australian tax purposes the income or gains generated by the structure from the use of the assets or when they access that income. 8. The documentation supporting the above transactions may be absent, inconsistent, incomplete or contain false information. In addition, such documents may not disclose the taxpayer's interest in, or involvement with, the structure. In many cases, the documentation lodged with the relevant authorities does not accurately reflect the involvement of the taxpayer with the structure (e.g. control, ownership or beneficial interest).