Deputy commissioner Michael Cranston said the ATO will be cracking down on arrangements that create artificial differences between taxable net income and distributable income of closely held trusts to improperly minimise tax.
“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,” he said.
The ATO revealed it has uncovered a number of cases of misuse through the ongoing monitoring of the Trusts Taskforce.
“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.
According to the ATO, the taskforce has raised $772 million in liabilities and collected $164.5 million since its establishment in 2013.
Additionally, assets of $55 million have been restrained under proceeds of crime legislation.
The ATO urged taxpayers who have or are thinking of entering into a similar arrangement to seek independent advice, review their arrangement or discuss it with the ATO.