At the time, thousands of people entered into blatant schemes, recruited through letterbox pamphlet drives or compelling door-to-door salesmen and attracted by promises of guaranteed returns in the form of inflated tax deductions. The courts, bound by restrictive interpretation of the tax laws, were unable to stop them.

From the sale of current year losses, to a primary production arrangement sold to students nearing the end of their tertiary education, there are many remarkable stories of tax avoidance from this period of time. The schemes were bold and deliberate. However, in 1981 the laws were changed, banning schemes with the purpose of tax avoidance. Over the next few years these schemes were brought under control.

It didn’t take long before a different breed of tax avoidance schemes emerged. In the 1990s more tailored, “boutique” schemes encouraging “investment” in areas such as the film industry, “business” franchises, primary production and research and development activities appeared. Like the schemes of the 80s, these “investments” were widely marketed to the public and spread fast. And again, many people were caught out and ended up with large, unexpected tax debts and penalties to pay.

Laws introduced in 2006 to deter scheme promoters mean that marketing tax avoidance schemes or misusing product rulings carry severe penalties for promoters. Also, today taxpayer alerts and product rulings provide better information and protection for investors. So, the schemes of the 21st century are no longer as blatant. The trend is moving towards more complex arrangements, “dressed up” as specialist financial or structured investment arrangements. Other schemes capitalise on the uncertainty of the financial climate, or exploit people’s social or environmental conscience and generosity.

The way that today’s schemes are “dressed up” sometimes makes it more difficult to tell the difference between legitimate tax minimisation and tax avoidance, so knowing how to recognise a tax avoidance scheme is not as easy as you might think. Even if you are an investor with years of experience, any arrangement that offers substantial tax benefits should be fully investigated before you get involved. It’s important to concentrate on the investment fundamentals, rather than getting drawn in by promises of big tax savings. A little bit of research now could prevent having to pay a large tax bill and penalties in the future if the arrangement does turn out to be a scheme.