The ATO has been very vocal about its compliance programs for the big end of town whether that be listed companies or more recently high net worth family groups. This has been extended by the Next 5,000 program and is complemented by the Medium and Emerging private groups tax performance program.
The importance of the Medium and Emerging private groups tax performance program is highlighted by the breadth of the program in which it covers approximately 97% of the total private group population. As such, taxpayers should not think about if they will go through a review but when – the odds of not being subject to a review are clearly very low.
The program applies to taxpayers who meet the following criteria:
- private groups linked to Australian resident individuals who, together with their associates, control wealth between $5 million and $50 million; and
- businesses with an annual turnover of more than $10 million, that are not public or foreign owned and are not linked to a high wealth private group.
The categories of the taxpayers is deliberately broad. For example, it can include individuals who have passive investments over the asset threshold without a business or individuals who have an interest in a business that turnover over more than $10m without having control. As such, a part owner of an emerging business can potentially be captured within the scope of a review when they hold less than the requisite asset thresholds.
The program is a more traditional review and audit program with broadly two profiles – a short program lasting 3-4 months and a longer more complex program lasting approximately 6 months. The concept being that the ATO will use the program to increase their understanding of the current environment these groups operate in with a view to targeting trends and tax risks.
The program has already commenced with the ATO having issued the first round of notifications and will be continuing to roll out.
So what should taxpayers do? Taxpayers are encouraged to review their recent activities and positions taken and engage with their advisors to ensure that all relevant items have been appropriately documented and aligned to current guidance. As part of this process taxpayers will need to develop a governance framework as to how they manage their risk looking forwards not backwards.
This program covers approximately 97% of the total private group population. It’s not a case of if, but when will you receive the ATO letter!
Do you need assistance with developing a robust corporate governance framework? Please reach out to your ESV engagement partner to learn more about our expertise in this area.