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 "The property market tide is in ebb. The introduction of new taxes for NSW investors has added additional pressure to an already slowing Sydney property market." - Mark |
| ATO targets investment properties |
| By Katherine Jimenez and AAP |
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May 31, 2004 TAXATION commissioner Michael Carmody warned yesterday that tax office audits into investment properties would be widened and corporate activity scrutinised more closely in the wake of the High Court's ruling on mortgage splitting. The High Court last week unanimously upheld an Australian Taxation Office appeal against a Canberra couple, Richard and Trudy Hart, who used a split loan to finance an investment property in 1996. The court ruled that splitting a home loan in two to claim big tax deductions on an investment property was illegal. Mr Carmody said the High Court ruling confirmed the tax office's approach to the anti-avoidance rule – one of its strongest weapons in cracking down on tax dodgers – and its position in a range of areas where investigations were already under way. "It will only give me greater confidence in relation to the cases that we have already taken on," he said, responding to whether there were specific transactions and companies that would be caught under Part IV A (anti-avoidance provision) that previously had not been caught. "I think it will confirm our position on a range of things, such as when they get to the court, then taxes will have to be paid. And it might just give a salutary warning to those who are looking at having more innovative financial and other arrangements placed before them." Analysts say the Harts decision helps to clarify the ATO's stand on the point at which tax planning becomes tax avoidance. Mr Carmody also told the ABC's Inside Business program yesterday that the tax office had received more funding for its activities in capital gains tax monitoring generally and would be looking more closely at investment properties and corporate activity. "More and more people are entering into investment properties and we'll continue our audits there," he said. "They will be expanded and this will be one aspect we are looking at." He said boards had an "acknowledged responsibility to manage risks for their corporation". "Tax is a very significant risk," he said. "So I'm suggesting that just like other risks, they need to contemplate where they want to be on the risk spectrum on taxation." While some corporations only wanted to pay tax that was due and payable, others took a more aggressive approach, and the tax office would watch what was happening on the margins of the law. "We can't take the line of least resistance on that because we would continue to move back and back and back and our fairly robust tax take now would start to diminish significantly." He said the Harts ruling could have implications for sale and leaseback arrangements, and consolidation arrangements, but the ATO would not pursue these as a general rule. "It's really only where people try and contrive arrangements to magnify the benefits . . . available that they need to get really concerned." Reference: The Australian 
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