ATO’s focus on trust property developers

ATO’s continuing focus on trust property developers

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% CGT discount.

Editor: See also TA 2014/1 – Trusts mischaracterising property development receipts as capital gains.

As part of the Trusts Taskforce, the ATO has escalated 75% of the cases reviewed for audit and has received voluntary disclosures.

The ATO will 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; and
  • The trustee claims the 50% capital gains tax discount on the sale of the property.

The ATO is encouraging practitioners to check their clients’ trust arrangements and make a voluntary disclosure if required.

Ref: ATO website, 18 May 2016

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