Australia Plans to Target Property Development Tax Strategy

The Australian Taxation Office is working on new guidance to crack down on related-party property development arrangements that it believes are being used to improperly defer paying taxes on project profits, potentially indefinitely.

The ATO alerted taxpayers Wednesday it’s looking into the arrangements and will seek input shortly on guidelines to police the space.

Here’s how the alleged scheme works, according to the ATO.

A taxpayer embarking on a property development project creates a developer entity. The entity contracts with the landowner to build on the property, which is used as collateral to back a construction loan. The landowner ...