The ATO is currently targeting contrived trust arrangements that minimise tax by creating artificial differences between the taxable net income and distributable income of closely held trusts.
Arrangements where trustees are engineering a reduction in trust income to improperly gain favourable tax breaks or pay no tax at all are being targeted by the Tax Office.
Trustees of these arrangements 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. The Trusts Taskforce was established in 2013 to undertake targeted compliance action against people involved in tax avoidance or evasion using trusts.
More than $40 million of lost revenue has been found in ten of the cases examined by the ATO, which go far beyond legitimate tax planning.
The Tax Office is looking closely to see if arrangements comply with trust law, constitute a sham or are captured by anti-avoidance provisions or integrity rules.
Any taxpayer who has entered, or are planning to enter, into a similar arrangement are encouraged to seek independent advice, review their arrangement, or discuss their situation with the ATO.