The Australian Tax Office
(ATO) often focuses on specific
behaviours, characteristics and tax
issues that are suspicious and can
lead to investigations.
Due to enhancements in technology, the ATO has
expanded its data matching capabilities which
have improved the ability to identify incorrect
reporting in tax returns.
The ATO has released a
list of behaviours and characteristics that may
attract their attention, including:
• tax or economic performance is not comparable
to similar businesses
• low transparency of tax affairs
• large, one-off or unusual transactions, including
transfer or shifting of wealth
• a history of aggressive tax planning
• tax outcomes inconsistent with the intent of
• choosing not to comply or regularly taking
controversial interpretations of the law
• lifestyle not supported by after-tax income
• treating private assets as business assets
• assessing business assets for tax-free private use
• poor governance and risk-management systems
One area of particular focus is incorrectly claiming
franking credits or not applying appropriate
governance to a franking credit balance. The ATO
is concerned with the following arrangements:
• where there is a substantial increase in franking credits as this may indicate the taxpayer has
entered into an inappropriate arrangement to take
advantage of franking credits.
• Using an entity that has a concessional tax
rate, such as a super fund, is often incorporated
into these arrangements.
The ATO continues to focus on compliance issues
associated with self-managed super funds. In
particular, the Tax Office is targeting:
• significant management and administration expenses.
• incorrect calculation of exempt current
• non-arm’s length transactions involving
companies associated with members and SMSFs
that may be intended to improperly redirect
dividends to the SMSF.