Subscribe to news digests

News Search

Industry News

Avoidance taskforce sets out strategy against trust schemes

Tuesday, 29 August, 2017

The Australian Tax Office's Tax Avoidance Taskforce says it has issued over AUD948 million in liabilities and collected more than AUD279 million over the past four years in its fight against the 'increased manipulation of higher risk trust arrangements as vehicles for tax avoidance or evasion by privately owned and wealthy groups'.

The Taskforce has set out a list of eight arrangements that attract the attention of its trust investigators, as below:

  • where trusts or their beneficiaries who have received substantial income are not registered, or have not lodged tax returns or activity statements
  • where there are offshore dealings involving secrecy or low-tax jurisdictions
  • where there are agreements with no apparent commercial basis that direct income entitlements to a low-tax beneficiary while the benefits are enjoyed by others
  • where there are artificial adjustments to trust income, so that tax outcomes do not reflect the economic substance – for example, where parties receive substantial benefits from a trust while the tax liabilities corresponding to the benefit are attributed elsewhere, or where the full tax liability is passed to entities without any capacity or intention to pay
  • where revenue activities are mischaracterised to achieve concessional capital gains tax treatment – for example, by using special purpose trusts in an attempt to re-characterise mining or property development income as discountable capital gains
  • where changes have been made to trust deeds or other constituent documents to achieve a tax-planning benefit, with such changes not credibly explicable for other reasons
  • where transactions have excessively complex features or sham characteristics, such as round-robin circulation of income among trusts
  • where new trust arrangements have materialised that involve taxpayers or promoters linked to previous non-compliance – for example, people connected to liquidated entities that had unpaid tax debts.

Earlier this year, measures were taken to strengthen the integrity of Australia’s tax system, with the Australian Tax Office (ATO) announcing that it expected to claw back AUD2.9 billion from multinational companies under tax avoidance legislation.

At the time, Treasurer Scott Morrison said, ‘We are making sure that multinationals, as they should, pay their fair share of tax, so that Australian citizens get the tax from the profits earned in Australia from Australian customers that is needed to fund vital infrastructure and services here in this country.’

The Tax Avoidance Taskforce ‘recognises that most trusts are used appropriately’ and pledges to, ‘continue to help those who make genuine mistakes or are uncertain about how the law applies to their circumstances.’