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:

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.

Contributor

Shu En Hwang

The post Private groups – ATO identifies key focus areas for FY25 & FY26 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.

Compliance obligations apply from a wide range of bodies at various times in the year, including:

• Australian Taxation Office
• income tax returns
• FBT returns
• GST returns
• superannuation payments and reporting
• Australian Securities and Investments Commission (ASIC)
• Australian Securities Exchange (ASX)
• financial Institutions
• industry bodies and regulators
• State Revenue Offices(s)
• Land Titles Offices(s)
• Australian Charities and Not For Profits Commission.

Our team has both the experience and adaptability to deal with your evolving needs as compliance becomes more complex.

We work with you to help you understand your requirements and establish lodgement deadlines. We then provide the accounting and taxation services to ensure you meet your reporting obligations.

Our compliance services are designed to work with you efficiently so that you can continue focusing on your business while we take care of the back office requirements.

We also utilise the latest technology where appropriate to make compiling your documents as pain free as possible. Our team provides advice to maximise your position while ensuring you meet your obligations.

The post Accounting & compliance appeared first on SW Accountants & Advisors.

Whilst government agencies are required to comply with Purchasing Guidelines for various tenders, different operational conditions has required organisations to reassess their procurement practices whilst still meeting procurement Policy and procedures. In this context a risk mitigation strategy of appointing probity advisors/auditors is recommended for all tenders where there is reputational, legal and/or financial risks in the current operating environment.

Probity services encompass both advisory and audit services. As advisors, probity experts support the Procurement Manager and the Evaluation Team throughout the tender process to ensure an objective, fair and reasonable process is undertaken in the context of achieving value for money.

As probity auditors, probity experts undertake an independent audit at various points in time to ensure the procurement process has complied with probity principles. By appointing SW as your probity advisor or auditor, we can help to ensure/attest that all key steps in the procurement process are carried out in an objective, fair and reasonable manner.

Probity advisory services

As your probity advisor we will work closely with you and the organisation throughout the process to advise, review and support the team to ensure compliance with probity principles of objectivity, fairness and reasonableness.

We shall help you:

• develop a probity and evaluation plan
• support the evaluation team whenever you have questions
• help you identify risks and provide solutions as required
• support you if any complaints are made
• provide training on good probity and procurement practices.

At the end of the procurement process we shall provide the organisation with a Probity Advisor’s Report.

Probity audit services

As your independent probity auditor we shall undertake an evaluation of the tender process in order to provide an opinion as to whether the process was objective, fair and reasonable.

Typically the audit will be undertaken:

• at the end of the planning phase
• at the end of the evaluation phase
• at the end of the tender evaluation report preparation phase (prior to submission to the Project Sponsor for approval)
• as your auditor we will engage with you throughout the procurement process to address any concerns raised by yourself or the Probity Advisor.

The post Probity & governance appeared first on SW Accountants & Advisors.

With experience helping a range of clients operating in the public arena and an understanding of the unique operating environments in which government bodies and entities operate, we offer sound, cost-effective advice across a range of areas including risk, governance, audit and compliance. 

The SW team members have provided services to a significant number of Government and Local Government agencies, including, Victorian water authorities, higher education institutions, health, regulatory and infrastructure.

The post Government & regulators appeared first on SW Accountants & Advisors.

A Director identification number is a unique identifier and has been introduced to prevent the false or fraudulent use of directors’ identities.

Who needs to Apply for a Director ID

You need a Director ID if you are an “eligible officer” of:

• a company, a registered Australian body or a registered foreign company under the Corporations Act 2001 (Corporations Act)
• an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act)
• Charity or not-for-profit organisation that is a company or Aboriginal and Torres Strait Islander Corporation, for instance public companies limited by guarantee
• Director of Incorporated Associations which have an Australian Registered Body Number (ARBN) – an incorporated association that is registered with ASIC and trades outside of the state or territory in which it is incorporated will be affected even if they are not ACNC registered.

An eligible officer is a director or an alternate director who is acting in that capacity.

There is provision for other types of officers to be prescribed by regulation so there may be further changes to this in the future.

When to apply for a Director ID

The Director ID application will be available from November 2021, with transitional arrangements for existing and new directors. When you need to apply for a Director ID will depend on when you become a director, as set out below:

Directors in place prior to 31 October 2022 for Indigenous corporations that are governed by the CATSI Act will be required to apply for a Director ID by 30 November 2023 and those who become eligible officers after 1 November 2022 will need to apply before their appointment.

Application process

The preferred process is to apply for a MyGovID and then apply online using the ABRS website. This may be difficult for some directors including foreign directors but there are alternative application processes available by telephone or paper applications.

We will provide further information in November 2021 once the application process is open. Although we cannot do your application for you, we can assist you in the process. Please do not hesitate to reach out to your SW Consultant to gain their assistance and more detailed instructions.

Get in touch

Reach out to your SW advisor or one of our key contacts for any questions about the Director ID’s and/or assistance with the process.

Contributors

Heather Dyke

E hdyke@sw-au.com

The post Director Identification Numbers appeared first on SW Accountants & Advisors.