The ATO have a series of programs through which they are targeting taxpayers with a view to raising tax collections.  The Next 5,000 program which began in 2019 is focused on making sure Australia’s largest privately owned and wealthy groups are paying the right amount of tax.

A “Next 5,000 taxpayer group” can be thought of as an individual, who together with their associates and connected entities, control net wealth of more than $50 million. Taxpayers that have already been captured under the Top 500 private group program are excluded from the Next 5,000.

The ATO have historically had success in reviewing this sector of taxpayers (its more cost effective than chasing smaller taxpayer) and therefore it’s safe to say this program is not going away!  Given the budget deficits both Federal and State, taxpayers can be assured of ongoing reviews in coming periods.

The ATO have provided an insight into the key issues the ATO will focus on for the Next 5,000 program in 2024–25.  As part of the upcoming reviews, the ATO will focus their efforts on:

• Streamlined assurance reviews for groups with more complex structures – as always complexity is in the eye of the beholder!
• Risk reviews will be completed for the remaining population – in other words a lighter touch approach.
• Effective record keeping and tax management – The ATO are continuing to focus on management processes and record keeping with a lot of the ATO’s success flowing from historical record issues and the complexity of the existing law in areas such as Division 7A.

The ATO are far more sophisticated than in prior years with reviews not only of the arrangements themselves or transaction but also the source of funding and the history of the entities.  This approach has led the ATO to identifying significant amounts of undisclosed income and therefore associated tax liabilities in the millions.

The public feedback provided by the ATO continues to identify issues around poor record keeping and a lack of documented governance procedures during their reviews and are driving this as part of the review process.  The ATO’s processes have a specific focus on capital events and financing of groups with historic records and treatments adopted on acquisition (potentially many years ago) now coming under scrutiny in the year an asset is disposed of.

If you have any questions about the Next 5,000 program, ATO and Revenue Authority reviews (eg Payroll Tax) or your governance processes please reach out to your Engagement Partner.