ATO puts 'dodgy donors' on notice over barter credit tax scheme

"The dodgy donor then claims a tax deduction for the full-face value of the donation. This is illegal and deprives the community of essential funds," the ATO said.

"Beware of any arrangements that have these characteristics."

The Tax Office warned that the scheme is currently spreading through personal networks such as friends, family and acquaintances.

"If you see it, or something similar that sounds 'not quite right', always check it with us or a tax professional before you act on it," it said.

The ATO warned business owners that this scheme, and other similar arrangements, may count as fraud and expose their business to investigation by the ATO. It could also lead to the repayment of tax with heavy penalties and interest, and legal action, it added.

"Further, the scheme can trigger an investigation of the DGRs receiving the donations. Whether or not the organisations are aware of the arrangement, this can negatively affect their operations," it said.

The Tax Office advised taxpayers t be wary of anyone promoting schemes that promise to significantly reduce or avoid paying tax.

Typical warning signs include persistent or pushy behaviour, especially heading into tax time or charging significant fees or commission based on the tax saved.

"Some promoters may even approach you advocating for a good cause, such as offering to arrange barter credit donations to a charitable cause. They may also request you to maintain secrecy," the ATO said.

The ATO noted that its tax schemes web content lists examples of the warning signs and the tax schemes we're concerned about.

"We recommend you review this important information and stay vigilant this tax time. Remember, if it sounds too good to be true, it probably is," it said.

"If you've been offered a scheme that you suspect is unlawful, you should reject it and report it to us."