Whether you’re in business or an individual taxpayer, if you have funds flowing between countries, the tax office is going to be interested in you. For individuals, Project Do It provides an opportunity to voluntarily disclose unreported foreign income and assets before the tax office discovers them.
For business, trigger points include:
- Excessive debt levels in Australia - The thin capitalisation rules place a limit on the level of interest and other debt deductions that can be claimed in Australia when Australian operations are heavily funded by debt rather than by equity. Legislation recently passed by Parliament retrospectively tightens these rules further for entities with very large debt deductions ($2m and above).
- Excessive costs paid by local subsidiaries. The Government is particularly concerned with arrangements where Australian entities transfer intellectual property to a low tax jurisdiction for a relatively small amount of money and then pay considerable sums for the use of those assets on an ongoing basis. Large management fees paid by Australian entities are another trigger for the ATO.
- Use of tax havens or low taxing jurisdictions.