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Australia Issues Taxpayer Alert on Re-Characterization of Income from Trading Businesses — Orbitax Tax News & Alerts

On 31 January 2017, the Australia Taxation Office issued a Taxpayer Alert (TA) 2017/1 on the re-characterization of income from trading businesses. From the description of the TA:

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We are reviewing arrangements which attempt to fragment integrated trading businesses in order to re-characterize trading income into more favorably taxed passive income. Our concern arises where a single business is divided in a contrived way into separate businesses. The income that might be expected to be subject to company tax is artificially diverted into a trust where, on distribution from the trust, that income is ultimately subject to no tax or a lesser rate than the corporate rate of tax.

These arrangements have the potential to erode the corporate tax base, particularly where they are promoted to overseas investors as a way to acquire tax advantages in Australia.

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Click the following link for TA 2017/1.