The Australian Taxation Office is targeting small practice accountants and lawyers who use discretionary trusts to minimise income tax. A discretionary trust, also known as a family trust, is one in which the trustee is given the power, or discretion, to decide who benefits from the trust.
The ATO is concerned about income splitting where, for example, a partner in a firm worth $300,000 a year on the open market, deliberately sets their salary below market rates; say at about $70,000, then funnelling the difference to low or non-income earning family members in their trust.
The ATO is also keen to ensure the correct amount of capital gains tax is being applied when firms change their structure from partnerships to companies or to a partnership of discretionary trusts. They will be reviewing individual cases of accountants, lawyers and other professionals operating through partnerships of discretionary trusts and will be meeting with key accounting bodies this week.
Bruce Quigley, the ATO’s second commissioner said the tax office was looking closely at these arrangements, and had invited those to contact the ATO to make a voluntary disclosure, which may result in a reduced penalty.
The Quinn Group’s tax accountants and tax lawyers can make a voluntary disclosure on your behalf and manage any issues you may be having with the ATO. Call us on 02 9223 9166 or submit an online enquiry.