Tax traps the ATO is watching

By  Stephanie Oakley
Categories: Business | Tax

The 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 which may attract their attention, this includes:

  • Tax or economic performance substantially differing from 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 tax law.
  • 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.
  • Accessing business assets for tax-free private use.
  • Poor governance and risk-management systems.


The ATO continues to concentrate on compliance issues associated with self-managed super funds. In particular, they are targeting:

  • Significant management and administration expenses.
  • Incorrect calculation of exempt current pension income.
  • Non-arm’s length transactions involving companies associated with members and SMSFs that may be intended to improperly redirect dividends to the SMSF.


Another area of focus is the incorrect claiming of franking credits or not applying appropriate governance to a franking credit balance.

The ATO is also concerned 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 the imputation dividend system. Using an entity that has a concessional tax rate, such as a super fund, is often incorporated into these arrangements.

Finally, an area that the ATO is keeping a close eye on is with wash sales. A wash sale occurs when a shareholder disposes of a share and repurchases a significantly similar parcel of the same share purely with the intention of claiming a capital loss.

Looking for tax or SMSF compliance advice, contact one of our advisers today.

ATO are watching


Related Articles
  • 15th April 2019

    Many property investors can access a wide range of tax deductions for their rental property and items subject to depreciation.

    Property investors may not be aware of the number

    ... more
  • 3rd April 2019

    Goods and services tax (GST) is applied to most goods and services sold in Australia, taxed at a rate of 10%.

    If you run a business, you are likely to have GST obligations, such as claiming

    ... more
  • 3rd April 2019

    The 2019 Federal Budget focuses on rewarding working Australians, with the emphasis on a two-pronged approach for “hard-working”  individuals.



    ... more