ATO crackdown on property developers’ income
The Australian Taxation Office (ATO) has warned property developers not to use trusts to give back proceeds from property as capital gains rather than income.
The ATO is concerned the developed property, commercial or residential, could be sold with the proceeds returned on capital amount, which gives access to the general 50 per cent capital gains discount.
The proceeds are not returned as ordinary income under the Income Tax Assessment Act 1997 either on a gross basis or a net basis.
“We have begun auditing property developers who are carrying out activities which conflict with their stated purpose of capital investment,” deputy commissioner Tim Dyce said.
“The ATO has already raised million in adjustments from people who exploit the system and our current compliance activity shows we are likely to make many more adjustments in the coming months.”
Failure to comply can result in penalties of up to 75 per cent of the tax avoided.
The ATO has begun auditing and has made adjustments to increase the net income of many trusts. It will continue auditing.
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