Deputy Commissioner Michael Cranston said the ATO is investigating arrangements where trustees are engineering a reduction in trust income to improperly gain favourable tax breaks, or sometimes pay no tax at all.
“Trusts are an important structure used by many people appropriately and in accordance with the law,” Mr Cranston said.
“Unfortunately we have seen some trustees enter into arrangements that create contrived differences between the trust net income and distributable income. These trustees exploit the differences to have the net income assessed to individuals and businesses that pay little or no tax, and allow others to enjoy the economic benefits of the net income free-of-tax.”
The ATO identified these arrangements through ongoing monitoring and reviews by the Trusts Taskforce, and continues to look for these arrangements using sophisticated analytics.
“Ten of the cases we are examining show lost revenue of more than $40 million and go far beyond legitimate tax planning, raising a number of red flags. We are looking closely to see if arrangements comply with trust law, constitute a sham, or are captured by anti-avoidance provisions or integrity rules,” Mr Cranston said.
The Trusts Taskforce was established in 2013 to undertake targeted compliance action against people involved in tax avoidance or evasion using trusts. Since this time, the ATO has raised $772 million in liabilities and collected $164.5 million. In addition to cash collected, assets of $55 million have been restrained under proceeds of crime legislation.
Any taxpayer who has, or is thinking of, entering into a similar arrangement should seek independent advice, review their arrangement, or discuss their situation with the ATO on 1800 177 006 or at TrustRisk@ato.gov.au.
