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How to steer clear of scams

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Let me tell you a story that I recall happening a few years back. It was a sick joke, or more accurately, an ‘A-SIC’ joke, with the Australian Securities and Investments Commission (ASIC) duping close to 233 would-be investors into risking $4 million in a get-rich quick company called Millennium Bug Insurance.

Of course, this is not the first time ASIC has played an April Fool’s prank on the public. A while ago, it took out ads in different newspapers selling exotic primary production, tax-dodging schemes. And yep, people fell for it big time.

Given our lack of time and education in money matters, small business owners looking for clever personal investment and tax-saving plans, as well as everyday Australians hoping to plan for a comfortable retirement, are vulnerable to these great sounding schemes.

In fact, ASIC should nearly pull a stunt every week to condition the public to avoid most of these schemes, despite the fact some are OK and can help with tax minimisation. But I reckon we should condemn them all first and make the good ones prove themselves via rigorous testing.

Unfortunately, the reverse is the case. They are all presented in smart advertisements and some have secured the voices of media money people and or simply ‘credible’ media stars.

Even more worrying, some accountants recommend these and receive a commission! Don't get me wrong, some plans are good ideas, but the fact an accountant suggests them does not mean they are safe.

People like me have to keep drumming home the message that if the return is promised to be big, then the risk is also on the big side.

David Marshall of Van Eyk Capital in Sydney is a scam-buster who regularly reviews these exotic agribusiness schemes and warns that many do not have the approval of the Tax Office.

But worse still, those which have a tick from the ATO as an allowable deduction often use this to preach the safety of the tax and investment play. Some even use ASIC in their proposals in an attempt to prove there is no or only minimal risk.

Clearly, not all of these tax reducing schemes are linked to the land. Many people have played bit parts in a money-losing investment in a film, etc, so treat all of these last minute tax crushers very carefully.

Anyone considering a plantation from heaven scheme or a plan to breed a sheep with a goat to produce a ‘geep’ should contact ASIC for advice on 1300 300 630.

They should also talk to their accountant who should be sceptical. And if he or she is pushing the idea, make sure you know if they are getting a commission.

Remember, it could all be above board and a sound tax-benefiting idea but it could also be a very expensive dud. Only by testing the proposition fully will you avoid a taxing loss.

Small business people work hard for their money. Don’t risk losing it and perhaps even your business as a result by chasing the high return which usually comes with high risk attached.

Work on your business, not in it. To learn how, book a complimentary business assessment today with a Switzer Business Coach.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Tuesday, January 12, 2010

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