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The ATO has warned against using trusts to return the proceeds from property developments as capital gains instead of income.
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ATO issues capital gains warning
29 July 2014
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Deputy commissioner Tim Dyce said the taxation office has already raised millions in adjustments from people who exploit the system in this way and it expects to make many more adjustments in the coming months.
“We have begun auditing property developers who are carrying out activities that conflict with their stated purpose of capital investment,” Mr Dyce said.
“A growing number of property developers are using trusts to suggest a development is a capital asset to generate rental income and claim the 50 per cent capital gains discount.
“Our enquiries indicate that these arrangements are contrived and some property developers are inappropriately claiming capital gains tax concessions."
The ATO has said penalties of up to 75 per cent of the tax avoided can apply to those found to be deliberately using special purpose trusts to mis-characterise the proceeds of property developments.
“Property developers should return the income from developments to ensure they are complying with the law,” Mr Dyce said.
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