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  • Results and insights – Trusts Taskforce

    In the 2013–14 Budget, the government announced it would provide $67.9 million over four years for targeted compliance action against people who have been involved in tax avoidance or evasion using trusts. This measure was estimated to increase revenue by $379 million over the forward estimates period and, in underlying cash terms, increase receipts by $217.1 million.

    From 1 July 2013 to 30 June 2017, the Trusts Taskforce raised over $951 million in liabilities and collected in excess of $283 million. In addition to the cash collected, assets of $55 million were restrained under proceeds of crime legislation.

    The Trusts Taskforce targeted known tax scheme promoters, individuals and businesses who participated in such arrangements. It also used our intelligence systems and analysis of tax returns to identify and deal with abusive use of trusts.

    In the most serious cases, criminal sanctions were pursued in collaboration with law enforcement authorities, through the Serious Financial Crime Taskforce and collaboration with overseas authorities.

    Amongst its achievements, the Trusts Taskforce:

    • finalised 62 audits and 864 reviews
    • had two convictions for serious tax fraud and referred a further four matters to law enforcement agencies for criminal investigation
    • issued three significant Taxpayer alerts with further alerts being issued by the Tax Avoidance Taskforce    
      • the first alert concerned artificial arrangements where a deliberate mismatch is created between trust and taxable income (Taxpayer Alert TA 2013/1 Arrangements to exploit mismatches between trust and taxable income)
      • the second alert concerned the incorrect claiming of the 50% capital gains tax discount by trusts engaged in property development activities (Taxpayer Alert TA 2014/1 Trusts mischaracterising property development receipts as capital gains)
      • the third alert concerned arrangements to exploit the proportionate approach to trust taxation by deliberately excluding much of the economic benefit that is reflected in the taxable income of the trust (Taxpayer Alert TA 2016/12 Trust income reduction arrangements).

    The Trusts Taskforce identified a number of examples of aggressive tax planning and tax evasion using trust structures, including:

    • trafficking in losses through the use of trusts
    • active exploitation of the lack of transparency associated with trusts
    • trusts distributing income to chains of trusts (some sharing the same corporate trustee), but where the beneficiaries fail to lodge income tax returns reporting that income
    • documents being falsified to gain a concession or benefit.

    This focus on egregious trusts arrangements continues under the operational umbrella of the Tax Avoidance Taskforce – Trusts.

    Supporting Research

    The Tax Avoidance Taskforce uses a range of sources when developing strategies to address non-compliance.

    As part of our ongoing program of work, the ATO commissioned the Royal Melbourne Institute of Technology (RMIT) to conduct independent research and provide an additional perspective on tax issues involving trusts to assist us to develop mitigation strategies to address trust mischief.

    This paper ‘Current Issues with Trusts and the Tax System’ is available on our website.

      Last modified: 14 Dec 2022QC 33917