Lifestyle of the Rich Can Raise a Red Flag, Says ATO

Lifestyles out of sync with after-tax income are among a range of behaviours by wealthy individuals that will raise a red flag, the ATO has said in a revised list of trigger warnings.

The ATO web page states, “What attracts our attention”, large or unusual transactions as well as “controversial interpretations of the law” and opaque tax affairs.

The ATO’s list of suspicious activity now takes in:

– Tax or economic performance not comparable to similar businesses

– Low transparency of tax affairs

– Large, one-off or unusual transactions

– Aggressive tax planning

– Tax outcomes inconsistent with the intent of the law

– Choosing not to comply, or regularly taking controversial interpretations of the law

– A lifestyle not supported by after-tax income

– Accessing business assets for tax-free private use

– Poor governance and risk-management systems

– Non-lodgement can attract attention

– Phoenix activity

– Outstanding business activity statements.

– Entities that did not lodge a return for the year under review and where instalments are low compared to the previous year.

– Directors with a number of outstanding lodgements.

– Directors who lodge a return not necessary.

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