The session will deliver a deeper insight into the technical and information requirements when preparing accounts, demonstrated how tax components are calculated and common accounting vs. tax differences.

Our fund experts will help you better understand:

• Update on the significant proposed tax changes arising from the recent Federal Budget
• The technical and information requirements when preparing accounts
• Demonstrate how tax components are calculated
• Common accounting vs. tax differences
• The basic accounting and tax knowledge of property trusts
• Key financial reporting requirements for funds
• Common issues for ordinary trusts, MITs and AMITs – including issues that affect property, equity and debt funds
• Update on recent tax and accounting changes
• ASIC and credit fund update

SW Speakers

René Muller
Partner, Assurance and Advisory Services
SW 

Luke Fernandes
Director, Tax
SW 

The post Funds Tax & Accounting technical training appeared first on SW Accountants & Advisors.

Impacted taxpayers  

From the 2026 income tax year and onwards, it is anticipated that groups with the following super funds or managed funds will be required to lodge an RTP:   

Background to the RTP Schedule  

Currently, large companies, which are part of groups that lodge Australian income tax returns disclosing $250m or more in revenue are required to lodge the RTP Schedule with their annual income tax return. The ATO provides further detail here. 

The RTP Schedule is designed to identify uncertain tax positions that large companies may have. It consists of three categories, each of which must be considered and completed. 

Category A  

Category A requires disclosures of material positions that are either:  

Category B  

Category B requires disclosures of:  

Category C  

Category C requires disclosures of:  

Potential areas of concern for large super funds and funds  

Whilst not an exhaustive list, the following taxpayer alerts and PCGs may be relevant to impacted super funds and other funds, and need to be considered as part of the completion of the RTP Schedule:  

How SW can help  

This is another example of the ATO gathering more data from taxpayers regarding arrangements it believes may give rise to Australian tax leakage, or where there is uncertainty in the Australian tax treatment. 

Although details are limited, these expected changes will impact larger funds and super funds for those completing their 2026 income tax return, as they will need to undertake a rigorous analysis to determine if they have a reporting obligation in the RTP Schedule.  

Our experts can assist you with identifying arrangements that are on the ATO’s radar, helping you better understand and proactively manage the appropriate tax treatment before the ATO raises any queries. This will give you greater certainty.   

We can also assist you in completing the RTP Schedule.   

Please reach out to your SW advisor for support from our team. 

Contributor

Stephen Peries

The post ATO expands Reportable Tax Positions Schedule to large super funds and CIVs appeared first on SW Accountants & Advisors.

The reforms are designed to improve investor protection within an emerging sector as some platforms have ineffective risk management as well as being largely unregulated in Australia. It aims to strengthen governance and align crypto with the standards already applied to traditional financial services. 

Bringing crypto in line with AFSL is expected to create consolidation within the sector and targets crypto exchanges rather than at the token level.   

Key changes 

• New categories under the Corporations Act 2001 will recognise digital asset platforms (DAPs) and tokenised custody platforms (TCPs) 

• These entities will be required to obtain an AFSL and meet obligations consistent with traditional financial service providers 

• The draft framework sets out obligations relating to custody, settlement, tokenisation, staking, governance, disclosures and consumer protection standards 

• Significant penalties will apply for operating without a licence, with some exemptions proposed for smaller operators 

What the draft law proposes 

The proposed changes amend the Corporations Act 2001 to introduce two new categories of financial service providers: 

1. Digital Asset Platforms (DAPs): Operators of trading platforms for crypto assets. 

2. Tokenised Custody Platforms (TCPs): Custodians of digital assets on behalf of clients. 

Entities falling into these categories will be required to: 

• hold an AFSL, with obligations largely aligned to those already imposed on traditional financial services providers. 

• implement and maintain controls for custody and settlement of digital assets. 

• comply with requirements on tokenisation, staking, governance, disclosures and consumer protection. 

• submit to ASIC oversight, including reporting obligations and enforcement measures. 

The regime proposes threshold exemptions for smaller operators. For example, platforms with client holdings below $5,000 per person or with annual transaction values under $10 million may not need to hold a licence. However, these exemptions are tightly defined and will not apply to most exchanges operating at scale. 

Penalties for non-compliance 

The penalties set out in the draft legislation are significant. Operating without an AFSL could attract fines up to $16.5 million, or a percentage of turnover or profit derived from unlicensed activities. This brings crypto regulation into line with other parts of the financial services sector where strong deterrence measures apply. 

Implications for the industry 

For many crypto exchanges and custodians, this will be the first time they are required to meet obligations such as: 

• annual and continuous reporting to ASIC. 

• preparation of audited financial statements in line with Australian Accounting Standards. 

• maintenance of sufficient financial resources to comply with licence conditions. 

• demonstration of effective internal processes, controls and governance frameworks. 

• the draft legislation also highlights areas of focus for regulators, including consumer protection, asset segregation, valuation of digital assets, cyber security, and the robustness of custody arrangements. 

Audit considerations 

The changes carry significant implications for AFSL audits. Crypto entities will be required to obtain assurance over governance structures, custody processes and financial resource requirements. Auditors will need to assess the operating effectiveness of internal controls, review the accuracy of financial projections, and test compliance with both the AFSL framework and guidance such as GS003 issued by the Auditing and Assurance Standards Board.  

There will also be an increased focus on digital asset risks, transparency, and the robustness of control environments. For many operators who have not previously prepared financial statements under Australian Accounting Standards, complex financial reporting matters are likely to arise which will require a high level of skill and experience in the sector to address. 

How can SW help?  

We recommend that organisations begin preparing now by assessing whether the regime applies to their business, reviewing current practices against the proposed obligations, and developing compliance plans well ahead of implementation. Engaging advisors early will be key to identifying gaps and reducing the risk of non-compliance, while staying across ongoing consultation and ASIC guidance will be essential as the regulatory detail develops. 

SW has a dedicated financial services team that advises cryptocurrencies, banks, fund managers, superannuation providers and brokers, and we meet regularly to share insights on emerging regulatory issues and industry trends. Our focus is on conducting efficient audits that address the risks of material misstatement, ensure compliance with Australian Accounting Standards, and provide clear reporting on governance and control effectiveness in line with GS003. 

With extensive experience in AFSL audits, our team is ready to help digital asset businesses understand and prepare for the new licensing environment. 

The post Crypto exchanges to require AFSL licences  appeared first on SW Accountants & Advisors.

The session delivered a deeper insight into the technical and information requirements when preparing accounts, demonstrated how tax components are calculated and common accounting vs. tax differences.

Our fund experts helped you better understand:

• the technical and information requirements when preparing accounts
• demonstrate how tax components are calculated
• common accounting vs. tax differences
• the basic accounting and tax knowledge of property trusts
• key financial reporting requirements for funds
• common issues for ordinary trusts, MITs and AMITs – including issues that affect property, equity and debt funds
• update on recent tax and accounting changes.

SW Speakers

René Muller
Partner, Assurance and Advisory Services
SW 

Luke Fernandes
Director, Tax
SW 

The post Funds Tax & Accounting technical training appeared first on SW Accountants & Advisors.

The key findings found in the Next 5,000 population were that most had informally documented tax governance-like processes and controls in place. The ATO is now increasingly focusing on the next ‘gen’ and tax issues arising from succession planning within a private group.

The ATO will select cases by using data analysis and risk profiling, to identify emerging risks affecting private groups and tax issues relating to the Next 5,000 key priority areas. Taxpayers who were previously reviewed and provided with feedback for improvement or had issues may be subject to a new round of ATO review. 

About the Next 5,000 program 

The Next 5,000 program was introduced to instil the community’s confidence that Australia’s largest and most complex private groups are compliant with their tax obligations.

This tax performance program considers Australian resident individuals who, along with their associates, control net wealth exceeding $50 million. Approximately 7,300 private groups fall under this population.

Comprehensive risk reviews (CRR) 

Whilst most taxpayers within this population will continue to be engaged through a streamlined assurance review (SAR), the ATO has recently advised that comprehensive risk reviews (CRR) will be undertaken for taxpayers identified:

• Through risk profiling of key emerging risks and tax issues affecting private groups, or
• In a previous SAR where the taxpayer had insufficient documented governance controls

How does the ATO engage?

A SAR typically involves request for information relating to the last two income years where tax returns were lodged, and for entities within the group with significant activities, events, and transactions. Where the ATO is satisfied that the four pillars of Justified Trust are achieved, future reviews will examine significant changes to the private group, and/or issues that were not considered/assured in the SAR.

In contrast, a CRR would encompass all entities within the private group and a substantially broader scope.

Click here for our previous coverage of Justified Trust and effective tax governance.

ATO focus for the 23/24 income year 

The ATO has identified taxpayers in the Next 5,000 population with the following behaviours and transactions as their focus for the 23/24 income year:  

• Tax governance framework not fit for purpose in supporting the expansion of the group 
• International expansion and cross-border transactions with related parties
• Entering into intra-group arrangements resulting in an ‘inappropriate’ transfer of wealth
• Re-structuring of the group for the purpose of intergenerational transfer of wealth
• Wealth extraction through private equity funds. 

Common tax issues observed in prior year reviews

Common tax issues that the ATO identified from the completed reviews, of which some were escalated to an audit, included: 

• Tax governance framework not fit for purpose in supporting the expansion of the group  
• International expansion and cross-border transactions with related parties 
• Entering into intra-group arrangements resulting in an ‘inappropriate’ transfer of wealth 
• Re-structuring of the group for the purpose of intergenerational transfer of wealth 
• Wealth extraction through private equity funds.  

Key Takeaways

The main observations made by the ATO regarding the Next 5,000 population reviewed to date are that although majority had tax governance-like processes and controls in place, most are not formally documented. The lack of or insufficient governance frameworks has a strong correlation with disclosure errors on ITRs/BASs and taxpayers not recognising tax risks or adopting correct tax treatments. 

Noting the program commenced on and around the in the 2020 income year and, taxpayers who were previously reviewed and provided with feedback for improvement, / had issues or unassured /transactions could not assured may be subject to a new round of ATO review. With the aging of the controlling individual/head, it also appears that the ATO is now increasingly focusing on the next ‘gen’ and tax issues arising from succession planning within a private group.

How SW can help

Reach out to us to discuss your tax governance issues, ATO reviews or other related matters.

Contributors

Antony Cheung

Shu En Hwang

The post ATO updates on Next 5,000 Program for private groups appeared first on SW Accountants & Advisors.

On 4 September, the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (Bill) was introduced into Parliament. Among the sweeping reforms proposed in the Bill, arguably, the change to the definition of ‘employee’ in the Fair Work Act 2009 (FW Act) may most warrant further consideration.

The new definition will reverse recent High Court cases (CFMMEU v Personnel Contract Pty Ltd; ZG Operations Australia Pty Ltd v Jamsek) establishing that in circumstances where there is a comprehensive written contract, the question of whether an individual is an employee of a person is to be determined solely with reference to the rights and obligations in the terms of that contract. This provided businesses with practical certainties as the classification of individuals as employees/contractors that was clear at the beginning of working relationships would remain consistent throughout the working relationship.

Instead, the definition of ‘employee’ and ‘employer’ under the FW Act will revert to be determined by reference to the real substance, practical reality, and true nature of the relationship between the parties. Effectively, the conduct of the parties after a contract is entered into will be considered under the ‘multi-factorial assessment’ in determining if there is an employment relationship. This means that businesses may engage an individual with the understanding that they are hired as an independent contractor, but later could be deemed an employee.

Navigating employer obligations – a new challenge

A significant issue that does warrant further consideration is that the new definition of ‘employee’ will only apply to the FW Act, while the definition of ‘employee’ in other Federal and State legislation is proposed to remain unchanged. Given businesses will have multiple overlapping obligations and responsibilities for each ‘employee’ (depending on which Act you’re referring to), the selective application of this new definition can lead to further complexity and fragmentation in complying with employer obligations.

As shown in the graphic below, businesses may be required to provide ‘employee entitlements’ to individuals taking into account post-contractual conduct under the FW Act, but not necessarily under other legislation. For example, this could lead to a worker being entitled to only those minimum pay and work entitlements provided by the FW Act, but not entitled to superannuation, workers’ compensation or long service leave. The increased complexity means there is a higher risk that businesses get it wrong. Practically, even where a business understands its various obligations and has the in-house capability to get it right, it is likely to increase the complexity of their internal processes and may require significant changes to their internal HR/payroll systems.

An alignment of the definition of employee across the various obligations which would involve co-operation between the State/Territory Governments and the Federal Government would go a long way to providing clarity and certainty for businesses. At the very least, a consistent definition across Federal Legislation should be considered.

In recognition of the complexity, the Australia Taxation Office (ATO) has historically had softer penalties for the inadvertent misclassification of employees and has recently been consulting on practical guidance that employers can rely upon to reduce ATO scrutiny.

ATO’s compliance approach

The Draft Practical Compliance Guideline 2022/D5 provides the factors the ATO takes into consideration in applying compliance resources to review worker classification (note that this has yet to be updated for the recent High Court cases mentioned previously). These factors include:

• whether there is evidence that both parties agreed to the arrangement to have a given worker classification
• whether both parties understand the tax and superannuation consequences of the classification
• whether specific advice confirming the worker classification was sought from an appropriately qualified third party, such as a solicitor or tax professional
• whether the performance of the arrangement has deviated significantly from the contractual rights and obligations agreed by the parties, and
• whether the correct tax, superannuation, and reporting obligations are being met.

While this guidance only applies to obligations administered by the ATO and is still in draft, it contains practical steps which if followed reduce the risk of misclassification across various obligations significantly. Therefore, it is prudent for businesses to consider the level of risk their current arrangements face and take proactive steps to ensure they have ‘low-risk arrangements’. By ensuring internal processes consider the factors above, this may reduce the likelihood of the ATO applying compliance resources to review the business’ worker arrangements and increase the likelihood of correctly classifying workers.

How SW can help?

The SW Team has expertise in assisting businesses and employers in complying with their employment obligations. By analysing contract language, payment schedules, delivery timelines and termination clauses, we provide businesses with the confidence that they are complying with the correct worker classification.

Considering the complexity of navigating employer obligations, our dedicated team designed a process that is considered low risk by the ATO.

Understanding and Setup – understanding the processes and controls that are in place to classify worker arrangements followed by designing a compliance program based on factors in the ATO practical compliance guideline to reduce risk.

Outsourced or co-sourced assistance – assistance with the classification of workers for various obligations, documentation as well as ongoing compliance activities.

In addition, SW can assist with more comprehensive, once-off review or advisory needs:

• conduct a comprehensive review of your assisting agreements and structure
• provide tailored advice on compliance and potential exclusions
• assist with private rulings for prospective arrangements with the relevant tax authority
• assist with voluntary disclosure if needed
• data analytics services to focus attention on higher risk arrangements across all suppliers paid.

Contact the SW Team today to schedule a consult and ensure that your business is prepared. Our expert team is here to support you every step of the way.

Contributors

Eric Lay

Zainab Ayub

The post Proposed changes to the definition of ‘employee’: Closing loopholes or opening uncertainty? appeared first on SW Accountants & Advisors.

I support and assist organisations to optimise and improve their operations and achieve business objectives. By evaluating and advising on decision-making processes, risk management practices, control mechanisms and governance procedures, I provide valuable insights and guidance while maintaining the highest standards of corporate governance and regulatory compliance.

Working with clients across a range of industries, including financial services, education, local government and government owned agencies, water authorities and other public and private sector organisations, my areas of expertise include:

• devising and executing outsourced internal audit programs
• crafting and assessing risk management frameworks
• conducting thorough investigations into fraud concerns and offering actionable recommendations for implementing effective fraud controls
• carrying out independent reviews on Anti-Money Laundering and Counter Terrorism Financing (AML/CTF) measures
• performing comprehensive payroll audits and evaluating compliance with Enterprise Agreements
• facilitating the development and review of Modern Slavery statements
• assessing general IT controls to ensure robust security measures, and
• evaluating controls and monitoring outsourced service providers to ensure seamless operations.

I am a member of the Institute of Internal Auditors in Australia, and a member of ISACA (Information Systems Audit and Control Association).

Laura Toscano is a Partner of SW Audit and a Director of SW Accountants & Advisors Pty Ltd.

The post Laura Toscano, Partner appeared first on SW Accountants & Advisors.

The training session provided the opportunity to maintain and develop expertise in managing the compliance for property funds, and assist with processes when working with an accounting firm such as ours.

The session delivered a deeper insight into the technical and information requirements when preparing accounts, demonstrated how tax components are calculated and common accounting vs. tax differences.

Our property fund experts spent time running through the basic accounting and tax knowledge of property trusts, and extended across the following topics:

• Recent 2023-24 Federal Budget update
• Recent 2023-24 Victorian and WA State Budget update
• Key financial reporting requirements for funds
• Common issues for ordinary trusts, MITs and AMITs – including issues that also affect equity and debt funds

SW Speakers

René Muller
Partner, Assurance and Advisory Services
SW 

Luke Fernandes
Associate Director, Tax
SW 

The post Property funds | Tax & Accounting technical training appeared first on SW Accountants & Advisors.

To achieve Justified Trust, private groups need to satisfy four key areas, including the effective operation of a tax governance framework. The ATO has outlined seven key principles for effective tax governance, and private groups need to satisfy the first four principles to achieve Justified Trust.

Drawing insights from the ATO’s findings report, the ATO has further outlined ten items that demonstrate effective tax governance frameworks.

While the Top 500 program targets private groups with a specific size, the ATO’s emphasis on tax governance is relevant to all substantial private groups.

What is the Top 500 program?

The program deviates from the typical ATO review in that it focuses on preventive, rather than corrective, action and is underpinned by the concept of Justified Trust. The program is targeted at groups that are not public or foreign owned:

• with over $250 million in turnover, regardless of net asset value
• with over $500 million in net assets, regardless of turnover
• with over $100 million in turnover and over $250 million in net assets
• that are market leaders or groups of specific interest.

My private group is not subject to the Top 500 program – is this still relevant to me?

Whilst the main focus of this alert is the Top 500 private groups, the answer to this question is yes. Increasingly, the ATO is placing emphasis on tax governance as a concept relevant to all substantial private groups, so it is not something that is confined to the Top 500.

The ATO’s ‘Next 5000’ program, for example (which focuses on groups with a net wealth of $50 million plus) also places significant emphasis on tax governance in assessing taxpayers tax affairs. All private groups of significant size are encouraged to have a documented tax governance framework tailored, of course, to their scale, operations and resources.  Therefore the comments below relating to tax governance matters have relevance to a broader range of groups. 

‘Justified Trust’ and the benefits

A Top 500 private group needs to meet the four key areas listed below at a ‘whole of group’ level to achieve the Justified Trust threshold:

• ensuring that effective tax governance frameworks, processes and procedures are in place
• risks flagged to market in the ATO’s Taxpayer Alert and Ruling programs are not present in the group
• the tax treatments applied to tax issues arising from ordinary and atypical transactions are demonstrated as correct
• differences between accounting and tax results are complete and understood in context.

Once a private group has attained Justified Trust, the benefits generally include a ‘lighter touch’ approach to reviews of the group by the ATO for three years.

Effective operation of the tax governance framework

To achieve Justified Trust, the implementation and effective operation of the tax governance framework is an essential requirement. 

The ATO has outlined seven key principles for what constitutes an effective tax governance framework, with an emphasis on the importance of the first four principles (noted above) as ‘required items’ and the remaining three principles listed below as ‘additional items’:

• professional and productive working relationship
• timely lodgements and payments
• ethical and responsible behaviour.

In practice, a private group should likely satisfy these three items if the ‘required items’ are effectively executed.

Drawing insights from the findings report (which is generally published annually), the ATO has recently further outlined ten items derived from the four principles for which a private group can rely upon to demonstrate that its tax governance framework is operating effectively and as intended.

Principle 1: Accountable management and oversight

1. Ensuring the segregation of tax and reporting governance, such that no one individual is solely responsible for the group’s entire tax function.
2. Whilst reporting lines may be in place to ensure the controlling mind(s) determines the group’s desired tax outcome, processes set in place to achieve that outcome should be independent of the controlling minds.

Principle 2: Recognise tax issues and risks

3. The ATO would take greater comfort if the group could demonstrate that the preparation of tax return includes an independent review of the draft return by an external advisor.
4. Where returns are prepared externally, the group or the tax agent can readily provide documentation evidencing that correct tax treatments have been considered for significant and/or atypical transactions, and be able to explain any differences between tax and economic outcomes. 
5. The tax governance framework for the group’s trading entities is reviewed and endorsed by the Board annually. Processes enabling the identification and addressing of weaknesses are in place. 
6. Substantiation exists to support group’s position on FBT.

Principle 3: Seek advice

7. An annual check-in with the ATO. There is a similar requirement under the 3-year monitoring and maintenance period upon reaching Justified Trust.
8. Documentation showing escalation thresholds (for internal decision making and/or external advice) were complied with and advice was sought on uncertain tax positions.

Principle 4: Integrity in reporting

9. Documentation supporting financial records of entities within the group reflecting a true and fair view of their performance and position.
10. Procedures detailing any differences in financial performance between accounting and tax consolidated groups (i.e. book vs tax outcomes).

Apart from the unwavering emphasis on the importance of maintaining detailed documentation of procedures for tax function, another observation worth noting is that a high assurance rating could be achieved satisfying at least three out of the ten items illustrated.

Are you ATO-review ready?

In preparation for a risk review by the ATO, private groups should:

• Consider their tax processes and tax risk management policies and procedures and ensure that appropriate documentation exists to support these and how they operate in practice. Whilst a lengthy formal tax governance framework will not be necessary in all cases, clients are encouraged to have their processes documented in a manner suitable to their organisation. 

• Ensure that group structure charts are up to date and other relevant documentation, including trust deeds, signed trustee resolutions are on hand and readily accessible.

• Ensure that tax positions on contentious items are appropriately documented and differences between tax and accounting results are readily explicable. 

How SW can help

SW has extensive experience in assisting clients and their advisors with the design, documentation and testing of tax governance frameworks and the ATO’s tax compliance program (such as the Top 500 and Next 5,000 reviews).

Should you have any queries in relation to tax governance issues, Justified Trust, ATO reviews or other related matters, please reach out to your SW contact or Key Contacts listed here.

Contributors

Antony Cheung

Tom Warrington

The post ATO updates Top 500 private groups tax program: how it affects your business appeared first on SW Accountants & Advisors.

The training session provided the opportunity to maintain and develop expertise in managing the compliance for property funds, and assist with processes when working with an accounting firm such as ours.

The session delivered a deeper insight into the technical and information requirements when preparing accounts, demonstrated how tax components are calculated and common accounting vs. tax differences.

Our property fund experts spent time running through the basic tax knowledge of property trusts, and extended across the following topics:

• Removal of special purpose financial reporting
• Key financial reporting requirements for property funds
• Managed Investment Trusts and Attribution Managed Investment Trusts
• General taxation of trusts
• Calculation of taxable income and tax deferred income
• Accounting vs. tax differences and common adjustments

SW Speakers

René Muller
Partner, Assurance and Advisory Services
SW 

Luke Fernandes
Associate Director, Tax
SW 

Carmelin De Francesco
Senior Manager, Tax
SW 

The post Property funds | Tax & Accounting technical training appeared first on SW Accountants & Advisors.