ATO Warns Investors About Ponzi Schemes

ATO Warns Investors About Ponzi Schemes

A Ponzi scheme is a type of scam to attract investors by promising huge profits with little to no risk. Existing investors receive dividends or other sorts of compensation from new investors’ capital.

The scheme operators do not offer any actual investments at all.

Some common warning signs of Ponzi schemes include:

  • A guarantee of continuous returns regardless of market condition
  • A rate of return that seems too good to be true
  • The investment logistics are difficult to explain
  • A known acquaintance tries to attract you
  • The recruiter encourages you to decide quickly
  • The recruiter has already invested in the scheme

The Australian Tax Office has issued a warning to investors addressing them to stay away from Ponzi schemes. All existing Ponzi scheme investors receive their dividend payments from new investors and are unlikely to be suspicious that the investment is false.

The promise of quick returns on their investment leads these investors to further involve their friends, family, and other acquaintances into the scheme. This ends up attracting more vulnerable individuals and organisations in the scheme.

In some situations, recruiters claim that investing in the plan is a way to avoid taxes for new investors. Since Ponzi schemes don’t have an actual base, they require fresh capital and investors to continue operating. In case the scheme fails, the majority of new investors will be left out of pocket and with little to recover their losses.

About Reporting Ponzi Schemes

The ATO says that it won’t be tolerating any sort of financial fraud under the name of Ponzi schemes.

Stay aware of the above given warning signs and also the tax saving schemes adopted by the ATO and ASIC to safeguard yourself and others from participating in fraudulent Ponzi schemes.

You might seek a second opinion from a dependable tax accountant or financial advisor if you are unsure whether a programme qualifies as a Ponzi scheme or not. If you suspect you or someone you know is involved in a Ponzi scheme, feel free to report the scheme to the tax office. For more information regarding Ponzi schemes, get in touch with our team at KPG Taxation right away.

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