One of Australia's most senior tax officials is entangled in a major fraud investigation involving his son in which $165 million was allegedly stolen from the Commonwealth.

Key points: Senior ATO official Michael Cranston to be charged with abusing his position as a public official

Senior ATO official Michael Cranston to be charged with abusing his position as a public official His son, Adam Cranston, was arrested at his Bondi flat and charged with conspiracy to defraud the Commonwealth

His son, Adam Cranston, was arrested at his Bondi flat and charged with conspiracy to defraud the Commonwealth In total, nine people were arrested as part of 28 raids across Sydney

A deputy ATO commissioner, Michael Cranston has been issued with a court attendance notice, while his son, Adam Cranston, was arrested in Sydney yesterday as part of an Australian Federal Police sting.

Michael Cranston will be charged with abusing his position as a public official relating to the alleged fraud, although he is not believed to be a conspirator.

It is understood Michael Cranston has worked for the ATO for three decades. ( AAP: Mick Tsikas )

Adam Cranston, 30, was arrested at his flat in the affluent beach suburb of Bondi during raids yesterday and has been charged with conspiracy to defraud the Commonwealth.

Michael Cranston's daughter was also arrested as part of the operation.

At a press conference in Sydney today, officials said they did not believe Michael Cranston had knowledge of the alleged conspiracy.

Acting commissioner of taxation Andrew Mills said two other ATO employees had been suspended while the organisation carried out an internal examination of what occurred.

"The people being investigated have been suspended without pay," he said.

Adam Cranston leaves the Sydney Police Centre in Surry Hills after receiving bail. ( AAP: Paul Miller )

Mr Mills said he could not overstate the seriousness of these matters.

"Australians must have a tax administration that they can trust and the people of the ATO must be of the utmost integrity and good judgement. This is even more important for those in leadership positions."

In all, nine people were arrested in Sydney yesterday as the AFP carried out 28 raids.

Adam Cranston appeared via video link at Sydney's Central Local Court and was released on bail, which was set at $300,000.

He had to surrender his passport to police and was told he could not leave Australia or travel to "departure points" while on bail.

Asked if he understood the terms, Adam Cranston said: "I do Your Honour."

'Lavish lifestyles hid money'

At a press conference today, the AFP alleged the group used "lavish lifestyles" to help hide the funds, including 25 motor vehicles, $15 million in cash, 18 residential properties and two aircraft among their assets.

The AFP also seized firearms, jewellery, artwork, vintage wines and $1 million from a safe deposit box as part of their investigation.

A light aircraft seized by police as part of their investigation. ( AFP )

Acting AFP deputy operations commissioner Leanne Close said the money had been "stolen from the community".

"So far investigations have taken us back to June 2016. So the $165 million we have identified is from that point onwards," she said.

"Because we [have seen] so much evidential material over the last two days, we will take time to examine that and see if that is where the conspiracy ends or if there is further charges, or further money that has been defrauded [allegedly]."

An Australian Federal Police officer inspects a vehicle as part of the raids in Sydney. ( Supplied: AFP )

Michael Cranston 'shocked' when told of son's arrest

AFP detective superintendent Kirsty Schofield described the moment Michael Cranston was told of the arrests yesterday.

"Michael was in shock when we spoke to him yesterday, as you would imagine, knowing what has happened to his son," she said.

Sorry, this video has expired AFP allege the Commonwealth was defrauded of $165 million

Michael Cranston will appear at Sydney's Downing Centre Court on June 13.

Federal Treasurer Scott Morrison said the arrests served as a broader warning.

"This is a major government crackdown and what the events today ... demonstrates is that if you are a crook and you are seeking to defraud the taxpayer, we will find you," he said.

"We will track you down. We will make sure you are brought to justice."

The ABC understands Michael Cranston has been employed by the ATO for more than three decades and is involved in the organisation's private groups and high-wealth segment.

Adam Cranston's wife, Elizabeth (right), and mother Robyn (left) leave Sydney Central Local Court on Thursday. ( AAP: Paul Miller )

Part of his biography on his LinkedIn account reads: "My personal philosophy is that the tax system belongs to all Australians and we all need to work closely together to ensure that it is administered fairly, efficiently and causes the least pain for all that participate."

Prime Minister Malcolm Turnbull said the alleged abuse of public office was regrettable.

"I'm not suggesting that this alleged conspiracy is anything other than a very regrettable criminal activity, the fact that there has been a person in the ATO that has been associated or involved," Mr Turnbull said.

"But the important point is that the system has worked.

"The conspiracy has been uncovered and the people who are alleged to be involved in it are being brought to justice."

Mr Turnbull said the investigation showed no-one could escape law enforcement agencies.

"No matter how high they may be in a government department ... they are being watched," he said.