ATO targets private company partnerships
The Australian Taxation Office (ATO) has announced a review of arrangements where a ‘purported' partnership with a private company partner is used to enable individuals to access business profits without paying ‘top-up' income tax at their marginal rates of tax.
According to ATO Deputy Commissioner, Michael Cranston, the ATO is seeing "contrived arrangements where business profits are claimed to be diverted to a partnership and as much as 99 per cent of profits are allocated to the private company and taxed at the 30 per cent tax rate".
"The company typically doesn't control or benefit from the profits," Cranston said. "Rather, the money is loaned or paid to individuals who do not include the amounts in their assessable income, avoiding ‘top-up' income tax on what they receive."
Typically, the profits are channelled to the partnership via a discretionary trust or through dividends from a private company, such as under a ‘dividend access share' arrangement. The partnership may also derive income from carrying on a business.
Cranston said the ATO was currently reviewing a number of cases that involve this type of arrangement.
"We encourage taxpayers who think they may be involved in such arrangements to contact the ATO to make a voluntary disclosure or seek a private ruling," Cranston said.
He added that affected individuals should consider seeking independent advice from an adviser not involved with this type of arrangement.
Recommended for you
The Reserve Bank of Australia (RBA) has lowered rates to a level not seen since mid-2023.
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
