Private groups – ATO identifies key focus areas for FY25 & FY26
23/10/2025
On 22 September the Australian Tax Office (ATO) published the key compliance focus areas it will be targeting when reviewing privately owned and wealthy groups for the 2025 and 2026 financial years. The ATO has signalled increased scrutiny across governance, trusts, CGT concessions, and more.
The ATO’s aim, in publicising its programs and focus areas, is to encourage taxpayers to identify and address risks and to improve voluntary compliance.
This presents an opportunity for private groups to review their governance frameworks, validate tax positions, and ensure readiness for future interaction with the ATO.
Private wealth group demographics
The ATO estimates there are about 284,000 private wealth groups in Australia. These groups are divided into three categories, and each category is reviewed differently as part of the ATO’s compliance programs:
| Market segment | Criteria | Estimated population size |
|---|---|---|
| Top 500 | • $500m in net assets, or • > $200m in turnover and > $250min net assets, or • ‘market leaders or groups of specific interest’ | 425 groups |
| Next 5,000 | • Australian individuals that (together with associates) control wealth > $50m | 8,200 groups |
| Medium and emerging | • Australian individuals that (together with associates) control wealth between $5m and $50m • Australian privately owned businesses with annual turnover > $10m | 275,475 groups |
ATO focus areas for private wealth groups for the 25/26 income year
Tax governance – a major (and increasing) priority
Tax processes are likely to be more centralised and concentrated in private groups than in public groups. Nonetheless, the ATO expects privately owned and wealthy groups to maintain a documented tax governance framework that clearly outlines roles, responsibilities, and escalation protocols for tax issues.
Aspects that the ATO are likely to focus on in this context include:
- processes for active identification, monitoring, and management of tax risks
- decision-making in relation to tax matters supported by documentation and specialist advice
- alignment of frameworks and processes with the ATO’s justified trust framework.
Claiming of CGT concessions
A number of CGT concessions are flagged for attention by the ATO as being risk areas. These include:
- eligibility for the CGT discount
- groups that inappropriately seek to access the small business restructure rollover provisions
- eligibility for other small business CGT concessions that are claimed
- arrangements where capital gains are distributed to foreign beneficiaries of trusts and capital gains are disregarded.
The ATO will be looking to ensure that eligibility conditions for the above concessions are met and appropriate documentation to support or evidence the concessions is maintained.
Various issues relating to trusts
Trusts are widely used in private groups and the ATO has indicated a particular interest in the following matters:
- section 100A – distributing to lower-taxed beneficiaries where there is a reimbursement agreement under which a person or entity other than the beneficiary effectively obtains the use or benefit of the relevant funds
- application of trustee beneficiary non disclosure tax where there are circular trust distributions
- distributions made by trusts that have made a family trust election or interposed entity election outside the relevant ‘family group’ that may trigger family trust distribution tax
- eligibility to claim franking credit tax offsets where distributions are made to newly incorporated company beneficiaries that may not meet the 45 day holding rule.
Division 7A
Division 7A is predictably a key area of focus of the ATO. In particular, they are monitoring common risk areas, including:
- failure to make required minimum yearly repayments
- non-complying (or non-existent) loan agreements
- arrangements designed to circumvent Division 7A with guarantees of third-party loans by private companies.
Other issues on the hit list
The ATO has also shown interest in several areas, including:
- lifestyle assets, which potentially raise various tax issues (for example, lifestyle assets being treated as business related, rather than person use assets, Division 7A and GST issues)
- succession planning – the ATO are interested in mechanisms employed in relation to intergenerational wealth transfer where business restructures or transfers of assets are involved.
Property and construction industry
The property and construction industry remains a focus for the ATO.
Areas of focus including:
- capital vs revenue treatment
- GST and margin scheme
- Non-arm’s length dealings within entities in the same private group to reduce their taxable income
- Failure to lodge or report sales or income (particularly subcontractors) as identified by the ATO through the TPAR.
Other industries
Other industries of focus include the following:
- tax advisers and professional firms
- private equity transactions and activities
- retail operations
- cross-border transactions
- crypto assets
- use of tax-exempt or concessionally taxed entities (super funds and not-for-profit entities, including ancillary funds).
How SW can help
The ATO is increasingly active in conducting reviews and audits of private groups. Being aware of these key focus areas is essential. Preparing in advance helps private groups manage risks effectively and maintain strong governance, which can minimise potential issues and ensure compliance.
SW have deep experience in advising private groups on tax governance frameworks, processes, and the various areas of interest highlighted above. We also have extensive experience in managing ATO reviews and audits.
Please contact us should we be able to assist in ensuring that your group is well prepared for any ATO review.
