As a business owner, you probably try to keep a close eye on updates from the ATO related to your tax compliance. Many of you will have an accounting advisor who does this for you and we also try to keep our community updated, so you can focus on running your amazing businesses.
A fairly significant update in relation to the ATO’s Compliance Program for Private Groups has just been announced. With a focus on prevention (as opposed to correction), the program will ensure that Australia’s wealthiest and largest privately owned groups are paying the correct amount of tax.
What is the Compliance Program for Private Groups?
The ATO communicates to taxpayers what resources will be dedicated to groups and industries as part of their compliance program. The ATO announced in late 2019 that they would start to focus their programs to the wealth market and, in particular, the following three segments:
- Top 500 large private groups – targeted at turnover of greater than $250 million
- Next 5,000 high-wealth private groups – net wealth greater than $50 million (current state)
- Medium and emerging private groups – net wealth greater than $5 million.
This compliance activity will be funded by the additional $1 billion in funding received by the ATO’s Tax Avoidance Taskforce in the FY20 budget, which is expected to raise an additional $3.6 billion in additional revenue.
These ATO reviews will be based on the ATO’s justified trust approach, which seeks to provide assurance that taxpayers are paying the right amount of tax based on the following four principles:
- Effective tax governance
- Tax risks flagged to the market by the ATO
- Tax outcomes of significant transactions
- Differences between accounting and tax results.
The aim of the Next 5000 Tax Performance Program
The Next 5000 Tax Performance Program has now commenced and is set to be rolled out over the course of four years.
The aim of the program is to provide public advice and guidance to high-wealth private groups with a controlled wealth of more than $50million.
High-wealth private groups are identified as Australian residents who (along with their associates) control wealth of more than $50million. The program does not cover:
- Individuals who control wealth less than $50 million
- Private groups that are already covered by the Top 500 private groups tax performance program
The ATO will engage with each high-wealth private group directly to:
- Identify trends
- Highlight priority issues specific to each individual group
- Develop strategies to assist in identifying and addressing any tax risks
The ATO works with high wealth private groups by:
- Notifying you of any issues
- Publishing public advice and guidance on relevant issues
- Providing clarity surrounding important commercial deals
- Engaging tailored reviews
- Providing audits where appropriate
How is the Next 5000 Tax Performance Program reviewed?
The review process includes the following steps:
Reviews are completed within 4 months of the ATO receiving all of the relevant information.
Throughout the duration of the review process, the ATO will:
- Notify high-wealth private groups in writing
- Meet with you to better understand your business
- Request more information in writing
- Discuss next steps with you
What to expect at the end of the Next 5000 Tax Performance Program review process
Following the completion of the review, the ATO will share their findings. They will:
- Give specific feedback
- Highlight any risks
- Outline transactions, events and activities where they approve of the tax treatment adopted
For more information, and to check your eligibility for the program, get in contact with one of our Melbourne-based accountants or a BlueRock advisor in your region.