The ATO has issued its first Taxpayer Alert of 2026, signalling increased compliance activity in the property development sector.
The alert focuses on “interposition” structures used in property developments, where the landowner, developer and builder are separate but related entities within the same controlled group. While such structures are not uncommon, the ATO has indicated concern about arrangements where the timing of income and deductions doesn’t align with the commercial substance of the project.
In the example outlined by the ATO, a timing mismatch arises where development costs are incurred progressively within a group, but income is only recognised at completion. The ATO has flagged that these types of arrangements may be used to defer income or utilise deductions across a broader group, increasing the likelihood of ATO scrutiny.
This alert forms part of a broader ATO compliance focus on related-party dealings and intra-group contracting arrangements, with a clear emphasis on whether the substance of these arrangements matches their legal form.
The ATO has indicated that a draft Practical Compliance Guideline (PCG) will follow, which is expected to provide a further insight into where the ATO draws the line between lower-risk arrangements and arrangements where audit activity will commence.
For property groups that use special purpose vehicles (SPVs) or related-party development structures, this alert is a clear signal of the type of arrangements the ATO is likely to examine in future reviews, audits and disputes.
Independent discussions can assist in assessing risk exposure and preparing for potential ATO engagement. Our tax disputes team regularly assists clients and their advisors in responding to ATO reviews and disputes involving complex property development structures, including managing information requests, technical positions and engagement with the ATO.
Read the Taxpayer Alert here: TA 2026/1 | Legal database
