Tax Alert // Private groups – the Tax Avoidance Taskforce

Private groups need to be prepared – the Tax Avoidance Taskforce is expanding its reach.

The ATO’s Tax Avoidance Taskforce has been expanded and is increasing its focus on ensuring private groups and wealthy individuals pay the ‘right amount of tax’. Created in 2016, the Taskforce was boosted in the 2019-20 Federal Budget with a further $1 billion to spend over 4 years to extend its operation to 2022-23.

The ATO now has 3 Tax Performance programs for private groups:

  • The Top 500 program – previously known as the Top 320 program, this program focuses on one-on-one engagement between the ATO and Australia’s largest private groups and involves the ATO issuing requests for information that centre on understanding a taxpayer’s business and previous transactions but also the entity’s tax governance and tax risks
  • A private groups program for Australian resident high wealth individuals – who with their associates control net wealth of more than AUD$50 million, and
  • Medium and emerging private groups – these businesses are typically individuals with their associates controlling net wealth between AUD$5 and AUD$50 million, or businesses with annual turnover of more than AUD$10 million

Taxpayers and their agents who are part of these programs will receive a notification letter soon from the ATO setting out what they need to do to prepare for the engagement process.

Bentleys comment

Engagement with the ATO’s Tax Avoidance Taskforce requires the taxpayer to understand the purpose of these programs which are designed to ensure the target is meeting their tax obligations and paying the ‘right amount of tax’.
The taxpayer will have been selected for a Tax Performance Program because the ATO’s background data analysis has assessed trends and tax risks flagging the need for further investigation. This risk assessment is not limited to size since taxpayers who are market leaders or part of groups of specific interest also may be considered to be part of the Top 500.
Based on our previous experience of dealing with the ATO’s Top 320 program and private and wealthy groups initiative, we expect to see the ATO focus strongly on:
  • The effectiveness of a tax governance framework – who is responsible for tax and financial decision making, what controls are in place and who they report to
  • Reviewing previous transactions and understanding how they were reported
  • Reviewing business structure and operations including details of any beneficial ownership in companies and/or trusts
  • Reviewing financial statements and tax work papers for the taxpayer, and
  • Reconciliations between accounting income and taxable income.
Where this review identifies particular risks we expect the ATO to increase audit/review activity of the taxpayer leading to potentially protracted and costly investigations into past activities, and real time analysis of new transactions.
It should also be noted that the ATO have identified key tax risk areas for private and wealthy groups which includes trusts, Div 7A, FBT and international activities.

To discuss the above please contact your usual Bentleys adviser today.