Need to Know

ATO focus on property developers and trusts

In recent years the ATO has focused on trusts developing and selling properties as part of their normal business. When these developed properties are sold, some trusts incorrectly claim a 50% capital gains tax discount.

As part of the Trusts Taskforce the ATO has escalated 75% of the cases reviewed for audit and have received voluntary disclosures. They continue to target arrangements that display the following characteristics:

  • clients have experience in either developing or selling property (or experience in the industry) and establish a new trust to acquire property for development and sale
  • circumstances surrounding the arrangement are inconsistent with the stated purpose of developing the property as a long term investment
  • the development is advertised as available to purchase before completion or is sold soon after completion
  • the trustee claims the 50% capital gains tax discount on the sale of the property.
The ATO is encouraging advisers to check their clients' trust arrangements and make a voluntary disclosure if required.

Source: shawgidley.com.au

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