On 17 November 2025, the Australian Taxation Office (ATO) released Taxpayer Alert TA 2025/3: Arrangements to improperly access deductions for donations of ‘barter credits’ (the Alert), which you can access here.

In the Alert, the Commissioner of Taxation (Commissioner) provides a strong warning to taxpayers regarding arrangements that involve obtaining barter credits or trade dollars (Barter Credits) under non-commercial financing arrangements, and then claiming inflated deductions for donations of the Barter Credits to Deductible Gift Recipients (DGRs).

If you have entered into, or are considering entering into, arrangements involving the donation of Barter Credits (or similar exchange-based currencies), you should carefully review your tax affairs and obtain tax advice immediately, as, if your arrangements are covered by the Alert, you may be exposed to significant tax risks that may give rise to serious administrative penalties (and potentially even prosecution in the most serious cases).

We set out below a summary of the Alert, the reasons why these arrangements are under scrutiny by the ATO, and what steps you should take to ensure you have met your tax obligations.

The Commissioner’s Focus

The ATO has identified and raised concern with arrangements where taxpayers pay an upfront fee, often called an ‘enabling’ or ‘establishment’ fee (Fee), to access a barter exchange. In return, taxpayers gain access to a financing facility (Facility) that allows them to borrow funds to purchase Barter Credits from the exchange.

These credits are then purportedly donated to DGRs, who issue receipts to the relevant taxpayer, which then claim deductions based on the face value of those credits.

The Commissioner is particularly concerned about Facilities with the following characteristics:

• non- or limited-recourse terms;
• no security is provided by the taxpayer;
• there are extended terms (such as 25 years), or shorter terms with rollover options;
• no interest accrues or is charged on the outstanding balance of the Facility; and
• the taxpayer has no real obligation to repay the outstanding loan amount, or it is repayable using Barter Credits.

Further, in many cases, the face value of the Barter Credits far exceeds the amount of the Fee paid to the exchange to access the Facility. Taxpayers then donate their Barter Credits to DGRs, receive a receipt for the nominal value of these credits, and claim a deduction accordingly — without having the repay the outstanding balance of their Facility.

In many instances, the DGR may not be able to effectively or practically use the Barter Credits, or the real value of goods and services they can access with the Barter Credits may be significantly less than the stated face value.

The Commissioner provides the following as an example of the arrangement:

Where is the Commissioner’s concern?

As set out in the Alert, the Commissioner considers these arrangements are likely to be ineffective for tax purposes and, in some cases, potentially unlawful. It is also recognised that taxpayers may be entering into arrangements under the mistaken or misapprehended belief that they are entitled to tax deductions for the full nominal face value of the Barter Credits.

The Commissioner also considers that, in some circumstances, these arrangements may also amount to a sham — potentially one whereby the parties involved are complicit/intend to participate in an unlawful (and possibly fraudulent) tax scheme.

Even if the arrangement is not a sham, the Commissioner considers it likely that the Facility terms, as outlined above, are not commercially realistic in any event, and there are serious doubts as to whether a Facility of this kind will ever be repaid.

The Commissioner is also concerned as to whether Barter Credits can be effectively donated and, if so, whether such a donation would qualify as a ‘gift’ under section 30-15 of the Income Tax Assessment Act 1997 (Cth).¹ This concern arises primarily from the view that it is unclear whether the legal requirements of a ‘gift’ are met when the Barter Credits are acquired through a financing arrangement (similar to those set out in the Alert) and then donated to DGRs.

Where arrangements are found to not constitute the giving of a ‘gift’ in accordance with the relevant legislative provisions, the ATO may seek to apply anti-avoidance provisions under section 78A and Part IVA of the Income Tax Assessment Act 1936 (Cth). The application of these provisions would deny any deductions claimed by taxpayers in respect of these arrangements.

In serious cases, the Commissioner may consider whether the arrangements involve fraud, which could lead to penalties and prosecution.

What about Taxation Ruling IT 2668?

In the Alert, the Commissioner recognises that some taxpayers may be incorrectly relying on Taxation Ruling IT 2668, which refers to valuing barter credits at a dollar-for-dollar rate with Australian currency.

However, and importantly, the addendum to IT 2668 warns against inflated valuations and highlights that transactions where Barter Credits are set at artificially high levels to generate inflated deductions may indicate fraudulent activity. The Commissioner has made it clear that these valuation principles do not apply to contrived donation arrangements.²

What is the ATO doing?

In the Alert, the Commissioner notes that the ATO will be engaging with the Australian Charities and Not-for-profits Commissioner to actively review arrangements relevant to this Alert, and it intends to engage with taxpayers, barter exchanges and DGRs to ensure income tax obligations have been met by all relevant parties.

The ATO has also indicated that it is currently developing its technical position and approach to these arrangements, and this may include clarifying that the valuation methodologies in IT 2668 are not applicable to these circumstances.

What Should You Do?

Donating Barter Credits under arrangements like those described in the Alert carries significant tax risk. If you are considering making a similar donation, or have already made one, you should seek specialist tax and legal advice immediately.

If you are considering entering a donation arrangement involving Barter Credits, you may need to obtain a private ruling from the ATO to confirm the deductibility of your donation.

Alternatively, if you have already participated in an arrangement similar to that as contemplated in the Alert, it may be necessary to lodge a voluntary disclosure to avoid serious compliance consequences.

Our tax team has extensive experience in Federal tax advisory, tax controversy and dispute resolution matters. HWLE Lawyers can help evaluate your circumstances, advise on your compliance with the Alert, and help you navigate any ATO engagement.

Please contact us today if you would like assistance with these matters.

This article was written by Timothy Stokes, Partner, and Anthony Centofanti, Solicitor.

¹The Commissioner’s view as to the interpretation and application of this provision is set out in Taxation Ruling TR 2005/13.
²Paragraph 15A of the Addendum to Taxation Ruling IT 2668.