In recent years, the ATO has focused on trusts developing and selling properties as part of their normal business. When these developed properties are sold, some trusts incorrectly claim a 50% CGT discount.
The ATO will continue to target arrangements that display the following characteristics:
- clients have experience in either developing or selling property (or experience in the industry) and establish a new trust to acquire property for development and sale
- circumstances surrounding the arrangement are inconsistent with the stated purpose of developing the property as a long term investment
- the development is advertised as available to purchase before completion, or is sold soon after completion
- the trustee claims the 50% CGT discount on the sale of the property.
The ATO is encouraging taxpayers to review their circumstances with their tax agent/adviser.
The ATO has also advised that they may contact property developers directly to “help them meet their obligations during development and disposal of the property. However, we may contact your clients at any stage of a development, not just on the sale of the property.”
If you get any such contact – let us know!