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.

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 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.

I invest time upfront to understand my clients’ business objectives. This enables me to deliver practical, commercially focused accounting and tax outcomes that align with each organisation’s strategy.

In addition to delivering strategic solutions, I have extensive experience managing tax compliance and value-adding projects of varying size and complexity. These projects share a common objective: delivering significant benefits to my clients.

I provide specialised services to the agribusiness industry and share examples of innovation and industry best practice with my clients.

I assist Chinese companies seeking to expand their business interests in Australia and Australian companies seeking to expand across Southeast Asia. My expertise in supporting cross-border growth is widely recognised.

I regularly present at industry events and forums, sharing insights gained from SIAL, Asia Fruit Logistica, and industry facility tours across mainland China.

I am a Partner of SW Audit and a Director of SW Accountants & Advisors Pty Ltd.

The post Steven Edmonds, Partner appeared first on SW Accountants & Advisors.