Developing trouble: ATO Alert on related party development management agreements
15/01/2026
The Australian Taxation Office (ATO) has issued Taxpayer Alert TA 2026/1, signalling increased scrutiny of common property development management agreement structures, which will substantially impact property developers.
The Alert raises the ATO’s concerns about certain property development management agreements. These typical arrangements are used by taxpayers to segregate the development risks from the land-owning entity. TA 2026/1 is another instance of the ATO seeking to apply Part IVA which is a significant development that will have a broad impact across many property developers.
Characteristics of arrangements under review
Those property development arrangements under review, typically involve:
- common ownership of:
– a land-owning entity
– special purpose developer entity (Dev Co)
- limited economic activity in Dev Co (e.g. no employees, minimal assets, and outsourcing of all construction activities to a builder)
- deferral of taxable income in Dev Co until the end of the project
- losses in Dev Co being utilised by the economic group.
The ATO has concerns that the arrangements are contrived to artificially separate land ownership and development activities to gain a tax timing advantage, being:
- upfront deductions in Dev Co that would not be available to the landowner
- the repeated deferral of income recognition.
The ATO has a specific concern that the repeated utilisation of development losses can result in the economic group perpetually deferring paying tax on group profits and enabling wealth extraction.
The ATO has indicated that Part IVA anti-avoidance provisions may apply to these types of arrangements.
ATO actions
The ATO has confirmed that they will:
- publish a Practical Compliance Guideline outlining a risk framework
- engage with taxpayers that are undertaking these types of arrangements.
How SW can help
TA 2026/1 is another example of the ATO seeking to apply Part IVA to a once typical arrangement. This is a common structure used by taxpayers to segregate the development risks from the land-owning entity. Whilst we have been aware of rumblings in this area from the ATO, this is a significant development that will have a broad impact across many property developers.
SW will provide more detail once the draft Practical Compliance Guideline is released and will discuss TA 2026/1 with any impacted clients.
Our experts can assist with advising how TA 2026/1 affects your existing arrangements. We can also engage with the ATO to deal with potential disputes.
Reach out to your SW advisor for support from our team.
