8 March 2017

There are certain behaviours, characteristics and tax issues that the ATO admits will attract its attention. But as it is more interested to see taxpayers get things right rather than the bother, and expense, of chasing down every misdemeanour, the ATO has spelled out the areas that most concern it — that is, the incidents or details that are more likely to raise a red flag.

Broadly, the following behaviours and characteristics may attract the ATO’s attention:

• tax or economic performance is not comparable to similar businesses
• low transparency of tax affairs
• large, one-off or unusual transactions, including transfer or shifting of wealth
• a history of aggressive tax planning
• tax outcomes inconsistent with the intent of tax law
• choosing not to comply or regularly taking controversial interpretations of the law
• lifestyle not supported by after-tax income
• treating private assets as business assets
• accessing business assets for tax-free private use
• poor governance and risk-management systems.

And there are certain areas of taxation — such as CGT, FBT, private company profit extraction (including Div 7A), the taxation of financial arrangements and more — that the ATO says its risk antennae are more sensitive to. Included in this list is the use of trusts.