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.

The Taxpayer Alert notes that participants in, and promoters of these types of arrangements, may be subject to penalties, including promotor penalties under Div 290 of Sch 1 to the Taxation Administration Act 1953.

Background on Division 7A

Division 7A (Div 7A) is a far reaching set of provisions the essential purpose of which is to treat certain payments and non-commercial loans made by private companies to shareholders or their associates as a distribution of profits and therefore a deemed (unfranked) dividend.

For a deemed dividend to arise, the relevant private company must have what is referred to in the legislation as a ‘distributable surplus’ (which is very broadly profits, reserves or surplus funds from which a dividend could theoretically be declared).

What types of arrangements is the ATO looking at?

Arrangements that are flagged by Taxpayer Alert TA 2023/1 as being high risk and in the crosshairs of the Commissioner are arrangements along the following lines:

• An individual who is a shareholder and director of a private company with retained profits.
• The individual disposes of their shares in the private company to an interposed holding company (set up by the individual) and receives shares in the interposed holding company in return.
• The value of the shares received in the interposed holding company equate to the net asset value of the private company, with the result that the interposed company has no ‘distributable surplus’ available for distribution.
• The individual applies CGT roll-over to disregard, for tax purposes, any capital gain arising on the disposal of the shares in the private company.
• The private company declares a franked dividend to the interposed holding company. Whilst the TA does not explicitly state this, it is expected that the dividend received by the interposed holding company (being a dividend received from pre-acquisition profits of the private company) would be recorded for accounting purposes as a reduction in the book value of the asset, rather than a receipt of profit. 
• The private company discharges its liability to pay the dividend by ways such as cash, cheque or promissory note.
• The individual receives a loan from the interposed holding company, financed by the dividend received from the private company. The terms of the loan do not comply with Division 7A (which requires loans to meet criteria such as a minimum interest rate and maximum term).
• Whilst the loan is not on complying Division 7A terms, taxpayers are taking the position that Division 7A would not apply due to the absence of a distributable surplus in both the private company and the interposed holding company. 

TA 2023/1 also indicates that the Commissioner would be equally concerned should a similar arrangement be entered into where the relevant shareholder is a trust, rather than an individual.  

Grounds to challenge

On the basis that arrangements such as the above exhibit a high degree of contrivance and would appear to be motivated by an objective of avoiding the application of Division 7A, TA 2023/1 notes that the Commissioner would be likely to challenge the arrangement on the following alternative bases:

• the Commissioner may assert that the loan is not a genuine loan, but a payment that is assessable as an unfranked dividend under the deemed dividend rules in Division 7A
• the arrangement may be challenged as a ‘dividend stripping’ scheme resulting in the loan amount being included in assessable income of the original shareholder and the franking credit on the dividend paid to the interposed holding company being cancelled
• under the general anti avoidance rules in Part IVA.

How SW can help

While the circumstances at which TA 2023/1 are directed are quite specific and may not affect many of our clients, the Taxpayer Alert highlights the efforts that the ATO are applying to enforce Division 7A.

Should you have any queries in relation to this Taxpayer Alert or Division 7A more generally, please reach out to your SW contact or Key Contacts here.

Contributors

Tanya Bester

The post ATO targets Division 7A avoidance scheme appeared first on SW Accountants & Advisors.

从2021年7月1日起，SIV合规基金的基金经理需要任命一名外部审计师，每年按照合规投资框架对基金进行审计，包括新兴公司部分和平衡投资部分。

基金经理和移民代理也将了解到，重大投资者类别和投资者类别签证的申请人必须按照合规投资框架进行资金投资。

根据《2015年移民（IMMI 15/100：合规投资）工具》的规定，内政部最近对相关要求做出了一些修改，其中包括对合规资产的修改，以及对合规投资框架中的新兴公司部分和平衡投资部分进行年度合规审计。

SIV申请人–您需要做什么？

所有在2021年7月1日之后获提名申请重大投资者签证或投资者签证的申请人都要在其签证申请中附上审计报告，以证明在截至2022年6月30日的一年中以及往后每一年，他们所投资的基金符合合规投资框架的规定。基金经理将提供这些文件。

在没有合规性审计报告的情况下，签证申请被批准的可能性非常小。

SIV基金经理和移民代理——您需要了解什么？

信永中和澳大利亚如何帮助您

在我们与整个行业的基金经理广泛合作的基础上，信永中和澳大利亚的专业审计团队完全了解签证申请人、移民代理和基金经理的适用审计要求，并拥有丰富的相关审计工作经验。

我们的SIV基金审计服务为SIV合规基金提供高效率且有实效的审计，以确保这些基金符合《2015年移民（IMMI 15/100：合规投资）工具》所规定的新兴公司和平衡投资部分。

请联系本事务所的SIV审计专家穆芮内和艾汝谧咨询。

基金管理领域的税务专家包括：

池澜滨、谭赛蒙、欧斯迪

The post 重大投资者签证基金 – 合规审计 appeared first on SW Accountants & Advisors.

From 1 July 2021, fund managers of SIV compliant funds are required to appoint an external auditor to annually audit the fund with the Complying Investments Framework for the emerging companies’ component and the balancing investments component.

As fund managers and migration agents will know, visa applicants for the significant investor stream and the investor stream visas are required to invest their funds in accordance with the Complying Investments Framework.

The department of Home Affairs recently made several changes to the requirements, as stipulated in the Migration (IMMI 15/100: Complying Investments) Instrument 2015. These included changes to complying assets and for the emerging companies component and the balancing investments component of the complying investments framework to be audited annually for compliance.

SIV applicants – what do you need to do?

All applicants who were nominated to apply for a Significant Investor Visa or an Investor Visa after 1 July 2021 will be required to attach audit reports to their visa application to show that for the year ended 30 June 2022 and annually thereafter, the fund/(s) they have invested in comply with the complying investments framework. These will be obtained from their fund managers.

It is highly unlikely that a visa application will be approved without the compliance audit report.

SIV fund manager & migration agents – what do you need to know?

How SW can help

Building on our extensive work with fund managers across the sector, the SW specialist audit team fully understands the audit requirements as applicable to visa applicants, migration agents and fund managers, and has significant experience with these audits.

Our SIV fund audit service provides efficient and effective audits for SIV compliant funds to ensure these comply with the emerging companies and balancing investments components as required by the Migration (IMMI 15/100: Complying Investments) Instrument 2015.

Reach out to our SIV Audit experts, Rene Muller and Rami Eltchelebi, to start the conversation.

Fund management tax experts include:

Abi Chellapen, Simon Tucker, Stephen O’Flynn

The post Significant Investor Visa Funds – compliance audit appeared first on SW Accountants & Advisors.

Holding our own Australian Financial Services Licence (AFSL), we have access to all products available on the market for which we receive research, conduct our own research or in many circumstances, both. Read more in our Financial Services Guide.

Daniel Minihan is an Authorised Representative of ShineWing Australia Wealth Pty Ltd trading as SW Wealth.

Australian Financial Services and Credit Licence No 236556

Level 10, 530 Collins Street, Melbourne VIC 3000 Australia

Wealth Privacy Policy

Wealth Compliant Policy

The post Wealth management appeared first on SW Accountants & Advisors.

His clients range from across the professional services, funds management, manufacturing, not-for-profit, property, shipping and transport sectors. He additionally:

• Has a thorough knowledge of taxation practice relating to trusts and private groups, including expertise on Division 7A assessments and has acted as an expert witness in relation to these matters
• Authors the Company Directors’ Manual, recommended by the Australian Institute of Company Directors and updated twice per year

Stephen is a director of a number of private client companies and is experienced in managing significant property assets.

The post Stephen Adrian appeared first on SW Accountants & Advisors.

She provides strategic advice to help large businesses, private businesses, high net wealth individuals and family groups manage international tax risk and realise value. Sam is also responsible for Employment and Remuneration Services at SW which includes expatriate taxation and employment taxes. Sam works with clients and their other advisers to deliver commercially-focused solutions in an easy to understand and straightforward manner.

Sam gained her expertise at Arthur Andersen in the UK, Deloitte UK and Australia, and Crowe Horwath Melbourne, where she was Head of Tax.

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

The post Sam Morris, Partner appeared first on SW Accountants & Advisors.

With experience helping a range of professional services firms, we have the expertise to help with long term strategic planning around business structuring, succession planning, remuneration and equity models and practice compliance. Innovative business structures, a clear vision about the future and plans to reach clients and human capital in new and flexible ways will be critical to future proofing your organisation.

The post Professional services appeared first on SW Accountants & Advisors.

Recognising that the growth of the Business Innovation and Investment Program (BIIP) is continuing to support Australia’s post-COVID-19 recovery through the investments and other economic contributions of visa applicants, the Federal Government has exempted all visas in the BIIP class with regard to travel restrictions to Australia. Additionally, late in 2020 the Department of Home Affairs announced that it would fast track Significant Investor Visa (SIV) and Investor Visa (IV) applications.

In 2020, a review of the BIIP program visa classes saw a reduction in the number of visa streams from nine to four, which included the cancellation of the Premium Investor, Significant Business History and Venture Capital Entrepreneur visas. It is expected that these changes will lead to an increased interest in the refurbished 188 SIV and IVs.

Overall, the changes are seen as being positive, with the attractive features and flexibility of BIIP continuing to prove popular to applicants.

What has changed for SIV and IV classes?

Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs, Alex Hawke, announced in May that the “Increased investment thresholds and the adjustment of investment ratios to focus more on venture capital and private growth equity will better support innovation and emerging enterprises in Australia”.

From 1 July 2021 the following CIF ratios will apply to both the Investor and the Significant Investor Visa streams:

• 20 per cent venture capital and Private Growth Equity funds (VCPE)
• 30 per cent funds investing in emerging companies
• 50 per cent in balancing investments
• Improvements to the Complying Investment Framework will include:
  • A clearer definition of Fund of Fund (FoF)
  • Applicants will be given 6 months to enter into their VCPE agreement, in lieu of the previously allowed 12 months.
  • A tightening of Emerging companies rules to close previous loopholes.
  • Fund managers will need to complete an annual audit for all of the funds they manage. The managers we work with are all committed to these changes including the annual audits.

A summary of these changes implemented from 1 July 2021 can be accessed here.

How we can help

For SIV and IV applications made between 1 July 2015 and 1 July 2021, the old rules will remain in place and the SW advisory team continues to provide advice and assist applicants and visa holders to manage and implement SIV and IV portfolios.

If you are considering applying under the post 1 July 2021 rules, our team can provide complete advice and assistance for:

• Visa applications
• Complying investments
• Financial review and wealth considerations
• Investment advice
• Relocation and concierge services
• Tax and accounting structure and services

Important note regarding Significant Investor Visa – Advice from ASIC

It has been found that some SIV applicants have been victims of serious financial fraud in Australia. Australia’s corporate regulator ASIC (the Australian Securities and Investments Commission) has expressed growing concern to the Department of Home Affairs (DHA) about investment referrals to particular managed fund products when visa applicants are being provided with immigration assistance.

Where a registered migration agent (RMA) or Australian legal practitioner refers a SIV applicant to a managed fund product, the referral might involve the RMA or Australian legal practitioner providing financial product advice under the Act.

With a message originating from the Immigration Integrity and Assurance Branch of the Department of Home Affairs, the Office of Migration Agents Registration Authority (OMARA) emailed all RMAs on 23 July to reiterate who can, and cannot, provide financial advice to Managed Fund Products under Australian law.

It stipulates that a person cannot provide financial advice in Australia unless the person holds an Australian Financial Services License (AFSL).

ASIC recommends that you encourage SIV applicants to seek independent financial advice and, as far as possible, that you refer SIV applicants only to fund managers with robust risk and governance frameworks.

The BIIP is a world class program, competing with other investment visa programs around the world to attract highly sought after investment capital. This reminder from OMARA and ASIC seeks to help to protect investors and enhance the integrity of the BIIP and assist visa applicants to obtain better quality investment advice that will lead to better investment outcomes.

How we can help

SW Wealth holds an authorised AFSL registration with ASIC and can assist with investment opportunities and advice. We can be found on the Financial Advisors Register, published by ASIC, here on the MoneySmart website. SW is an Australian owned accounting and advisory firm with an 85+ year history and provides a full range of wealth management and business advisory services, tax, assurance and corporate finance.

Contacts

Daniel Minihan

E dminihan@sw-au.com

Natasha Wood

E nwood@sw-au.com

The post Investor Visa update & ASIC advice for SIV applicants appeared first on SW Accountants & Advisors.

Over your lifetime you will likely build up a range of assets and wealth. Upon your death, these will need to be distributed in accordance with your through an estate plan.

What is estate planning?

Estate planning is not just about having a Will, it’s about ensuring that the assets you control are transferred to your intended beneficiaries, in a tax effective manner.

Your Will only looks after assets in your personal name. Your estate plan considers assets that are in entities controlled by you, such as through companies and trusts and importantly, your superannuation.

As accountants and business advisors, we are in a unique position to understand where all your assets are held and who ultimately controls those entities. It is also important to understand how debts and liabilities are to be dealt with as some debts may be paid off, while others may transfer to your beneficiaries.

What should business owners’ consider?

For businesses owners’, part of your estate planning should ensure that you have a Buy/Sell Agreement in place with the other shareholders in the business and Buy/Sell insurance. This is important because some beneficiaries will not want to be involved in the business and wish to cash out of the investment as soon as practicable. Without this in place, the business may need to be sold to pay the estate.

Additionally, surviving shareholders will have an increased percentage shareholding and a Buy/Sell Agreement will ensure an unplanned shareholder will not be involved in the running of the business.

A practical and beneficial estate plan is a collaboration between you, your accountant, and your solicitor.

How can SW help?

SW is co-hosting a three-part webinar series on Estate Planning and Power of Attorneys with Burke & Associates Lawyers. Join us to learn more about how estate planning can assist you.

Contacts

Matthew Oakey

E moakey@sw-au.com

Heather Dyke

E hdyke@sw-au.com

Keegan O’Rourke

E korourke@sw-au.com

The post Estate Planning appeared first on SW Accountants & Advisors.