The ATO has released further information on the potential targets of its compliance action utilising its intelligence systems, including new tax return labels.
It said some of the factors that will attract its attention include arrangements where:
- trusts or their beneficiaries who have received substantial income are not registered, or have not lodged tax returns or activity statements;
- there are offshore dealings involving secrecy jurisdictions;
- agreements with no commercial basis appear to be in place so as to direct income entitlements to a low-tax beneficiary while the benefits are enjoyed by others;
- there is artificial characterisation of amounts, such that tax outcomes do not reflect the economic substance, with the result that some parties have received substantial benefits from a trust while the tax liabilities corresponding to that benefit have been attributed elsewhere (for example, by making resolutions that artificially reduce trust income in attempts to direct minimal present entitlement but full tax liability to entities with no capacity or intention of paying);
- there has been mischaracterisation of revenue activities to achieve concessional CGT treatment (for example, by using special purpose trusts to attempt to re-characterise mining or property development as discountable capital gains);
- changes have been made to trust deeds or other constitutional documents to achieve a tax planning benefit, and are not credibly explainable for other reasons;
- transactions have excessively complex features or sham characteristics, such as round robin circulation of income among trusts; and
- new trust arrangements have materialised that involve taxpayers and/or promoters who have histories of or connection to previous non-compliance (for example, people connected to liquidated entities that had unpaid tax debts).
According to the ATO, the taskforce is intended to target higher risk taxpayers and not ordinary trust arrangements and tax planning associated with genuine business or family dealings. However, it said those taxpayers that are unsure regarding their arrangements can seek a private binding ruling, or contact the ATO via the trusts taskforce at TrustRisk@ato.gov.au (mark all information "in confidence") to discuss the arrangement. Alternatively, the ATO said voluntary disclosures can be provided if taxpayers need to adjust a tax position that had previously been taken with the Voluntary disclosures - approved form.
Source: These articles were first published in Thomson Reuters' Weekly Tax Bulletin and Tax & Accounting Insight. To subscribe to Weekly Tax Bulletin or Tax & Accounting Insight, or for more information, please:
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More Cleardocs information on related topics
You can read earlier ClearLaw articles on a wide range of trusts topics here.