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ATO identifies taxpayers’ ‘red flag’ behaviours


The ATO has listed the behaviours and characteristics that are most likely to attract its attention, including low transparency of affairs, large one-off transactions and a history of aggressive tax planning.

By Miranda Brownlee 12 minute read

Tax and Super Australia said with the ATO more interested in taxpayers and businesses getting things right rather than chasing down every mistake, it has labelled the areas of highest concern.

Some of the key areas include tax or economic performance that is not comparable to similar businesses, low transparency of tax affairs and large or one-off or unusual transactions, including transfer or shifting of wealth.

The ATO will also be looking at tax outcomes inconsistent with the intent of tax law, controversial interpretations of the law, lifestyles that are not supported by after-tax income and the treatment of private assets as business assets.


In addition, the ATO is closely monitoring the accessing of business assets for tax-free private use and poor governance and risk-management systems.

“There are certain areas of taxation, such as CGT, FBT, private company profit extraction (including Div 7A), the taxation of financial arrangements and more, that the ATO says its risk antennae are more sensitive to. Included in this list is the use of trusts,” said Tax and Super Australia.

Tax and Super Australia said differences between distributable and taxable income are also a “hot ATO touch point”.

“We focus on differences between distributable income of a trust and its net [taxable] income, which provides opportunities for those receiving the economic benefit of trust distributions to avoid paying tax on them,” said the ATO.

Tax and Super Australia said the ATO will also focus on trusts that are carrying on a business of selling an asset as part of a profit-making undertaking.

“Inappropriate characterisation as capital can occur where property developers set up special purpose trusts and report any profits from the ultimate sale of the property on the capital account in order to claim the 50 per cent CGT discount,” the ATO said.

“These profits should be on the revenue account for tax purposes because the property is sold as part of a profit-making undertaking.”

Miranda Brownlee

Miranda Brownlee


Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.

Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.

You can email Miranda
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