What are ATO Private Group Tax Reviews and How Do I Prepare?
May 2024
Damian James, Partner - Specialising in corporate taxation, taxation of complex family groups, financial risk management and business strategy.
The Australian Taxation Office (ATO) have programs targeted at privately owned groups that seek to give the community confidence that Australia's largest privately owned and wealthy groups are paying the right amount of tax. Each program is targeted at different segments based on the size and wealth of the private group.
- Top 500 Private Group Tax Performance Program:
- targets the largest private groups in Australia ($250m in turnover or $500m in net assets), and
- aims to ensure compliance with tax laws and regulations among these high-income private entities.
- Next 5000 Private Group Tax Performance Program:
- targets the next tier of private groups following the Top 500 (wealth of greater than $50m), and
- is designed to promote compliance and address tax risks among medium-sized private entities.
- Medium and Emerging Private Groups Tax Performance Programs:
- targets medium-sized and emerging private groups that may not fall within the Top 500 or Next 5000 categories (wealth between $5m and $50m or annual turnover of greater than $10m), and
- aims to promote tax compliance and address risks specific to businesses in the medium and emerging sectors.
The ATO's approach involves a combination of risk assessment, data matching, and compliance activities to ensure that businesses within these programs are meeting their tax obligations accurately. As part of the program the ATO use a Justified Trust methodology to build and maintain community confidence that taxpayers are paying the right amount of tax.
They do this by reviewing four key areas:
- Understanding a taxpayer's tax governance framework
- Identifying tax risks flagged to the market via Taxpayer alerts, Practical Compliance guidelines or Public Rulings
- Understanding significant and new transactions
- Understanding why the accounting and tax results vary
In these reviews, we have observed that the ATO prioritises the establishment of suitable corporate and tax governance processes within private groups. The ATO emphasises tax governance due to its role in fostering effective oversight, thereby ensuring adherence to tax and super obligations.
What can you do now to prepare for an ATO private group tax review?
Review your tax governance processes.
Ensure clear roles and responsibilities:
- Clearly define and understand roles and responsibilities, ensuring accountability for tax administration and decision-making.
- Gain a comprehensive understanding of tax and super obligations, covering registrations, lodgement, reporting, payment, and record-keeping responsibilities.
- When sharing tax governance responsibilities with advisors, as a business owner, maintain confidence in understanding your advisor's role in meeting tax and super obligations.
Recognise Tax Risks and Issues:
- Implement processes and procedures supporting compliance with your tax and super obligations, including the identification and management of emerging tax issues before they escalate into risks.
- Document material transactions as they happen.
- Develop plans to manage identified tax issues or risks, minimising their impact on your business.
Seek Advice:
- Establish clear arrangements for escalating tax issues and seeking timely tax advice.
If you want more information on the ATO’s private group performance programs or you have received correspondence from the ATO that you are subject to a review please reach out to Damian and the team at Matthews Steer. We are ready to support you in proactively preparing, responding with confidence, and establishing trust with the Australian Taxation Office.
Email info@matsteer.com.au or give us a call on 03 9325 6300.