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  • Updated Taxpayer Alert – Re-characterisation of income from trading businesses

    We have updated Taxpayer Alert 2017/1 to account for new legislative developmentsExternal Link with certain rental stapled structures. The revised Taxpayer Alert will continue to apply to those rental stapled structures that are not covered under the new law.

    We continue to review arrangements attempting to re-characterise trading income into more favourably taxed passive income. Under these arrangements, income generated by a business is shifted from a corporate tax entity to a flow-through trust. This may result in a reduction of the overall rate of tax applicable to the business without any material change to the underlying nature, customers or owners of that business. These arrangements have the potential to erode the corporate tax base.

    The ATO will continue to engage with taxpayers who have proposed these arrangements, to explore the issues of concern, and ensure any restructuring arrangements do not seek to avoid the payment of corporate tax.

    Taxpayers and advisers who implement these types of arrangements will be subject to increased scrutiny.

    What should you do?

    If you have entered into – or are contemplating entering into – an arrangement of this type, we recommend you:

    • seek independent professional advice
    • review your arrangement
    • discuss your situation with the ATO by emailing PGIAdvice@ato.gov.au

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    Last modified: 12 Feb 2020QC 61389