You are a miner grossing more than $100,000 a year. You are in a Kalgoorlie pub having a beer on a day off and a workmate introduces you to a smooth-looking bloke who is well-dressed and accessorised.
After dropping the names of his AFL player clients, he asks you if you would like to reduce your tax. Of course you would, you work hard for what you earn.
That is how many Kalgoorlie residents came to know the promoters of tax minimisation schemes that ended with some losing their family home.
These days, locals are wiser about how they invest their money.
The promoters worked frantically in Kalgoorlie from the mid to late 1990s. Then in 2000, the Australian Taxation Office cracked down on some schemes, and demanded repayment in full plus interest and penalties from participants.
The great Goldfields tax scheme scandal is a piece of Kalgoorlie history that many people would prefer to forget, others have learned from and still others continue to feel.
The city is a draw for promoters of every type of scheme and has more than its fair share of victims of property and investment scams.
For promoters, the attractions are a median annual income of $55,000 and a youngish population. Most Kalgoorlie locals were caught themselves or knew someone involved and they still remember the anguish. While it is still fresh in our minds, the consensus among local financial planners and accountants is that it won’t happen again on such a large scale.
Very few Kalgoorlie planners and accountants recommended the tax schemes at the time they were abundant, although they have had to deal with the consequences.
“I used to get a query about a (tax effective) scheme once a week, now I wouldn’t get one a month,” a senior financial planner working for one of the big four banks said.
The planner said margin lending is popular for people in Kalgoorlie who aren’t interested in property.
“The dust seems to be settling,” principal consultant of a financial planning business operating under the Godfrey Pembroke banner, Kim Stewart said. He said younger people were consulting financial planners as they were more educated and media-savvy.
“The dust has not settled as I have clients who are still paying off their tax liability to the ATO,” chartered financial planning group SKFG’s Neville Hatton said.
“I went to see some clients and they produced a bill from the ATO for over $110,000 and this left a bitter taste in my mouth as they asked me for advice on reducing this liability. Back then negotiations were going on with the ATO and there wasn’t really much I could do.”
Mr Hatton said the couple went bankrupt and eventually left with only their personal effects.
He said a recent trend was young people staying in the Goldfields and reaping the rewards rather than earning big, spending big and leaving only to return later when they can’t adjust to a lower income.
“I do find that the people who have settled here for the long term are in a sound financial position and look to have more property in their portfolio,” Mr Hatton said.
“They are looking for negative gearing to go up against their high assessable income.”
Both Mr Hatton and Mr Stewart have similar concerns about how the schemes were marketed.
“I don’t like the way the schemes were marketed, targeting anyone with gross income over $100,000,” said Mr Hatton.
“I used to ask my clients ‘where did they meet these advisers?’ and their answer was ‘in the pub’.
“The product disclosure statements were very glossy and looked good, but there was no mention by the ATO of them being legitimate. Accountants around town were very worried about the schemes and they were warning people.”
• Based in the Goldfields, Sharon Kemp is a former reporter, most recently with The Age newspaper.
