Next 5,000 Review Program: An Update on ATO Private Groups Tax Program – and How we PROTECT YOU!

ATO announced details about its new audit and review program called the “Next 5,000 Tax Performance Program”.

While this ATO Programme focuses on larger privately owned wealthy groups, it has provided us with valuable insights into what the ATO is looking at.

In the future, the ATO will analyse your financial records and issue you a questionnaire.

This does not imply that you or we did anything incorrectly. It simply means that we must disclose specific papers and information to the ATO in order to answer any questions they may have based on their data matching of your information. This may satisfy the ATO, or the ATO may opt to ask additional questions and initiate a tax audit process if they are concerned about any initial information submitted to them.

What is the “Next 5,000 Review Program?

The Next 5,000 is an extension of the Top 500 Private Groups Tax Performance Program that aims to offer the public confidence that Australia’s largest privately owned and wealthy groups are paying the correct amount of tax.

The Next 5,000 taxpayer groups include individuals who, with their associates and associated companies, have a nett worth of more than $50 million. Taxpayers who have previously been identified through the Top 500 private group programme will be excluded from the Next 5,000.

There are currently around 7000 private groups in the Next 5,000 population. As a result, the types of reviews that the ATO will perform will alter, with the private group’s position in the population playing a significant role.

As your expert tax accountants, our being aware of what the ATO is focusing on ensures that you have the highest level of protection possible in the event of an ATO audit!

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KEY ATO FINDINGS

Numerous related party transactions and trust distributions were discovered by the ATO to be improperly recorded. Furthermore, they discovered:

• assets sales and capital gains tax not being reported correctly
• incorrect GST calculations
• common mismatches between the reported income and expenses between related parties
• lack of independent valuations to support pricing of transactions between related parties such as involving real property
• omission of related party income such as rental income
• issues with family trust elections
• loans which are not compliant with Division 7A of the Income Tax Assessment Act 1936.

WHAT THIS MEANS FOR YOU

Making sure that every business group has sufficient TAX GOVERNANCE is the main takeaway from this ATO program.

This includes:

• Clear roles and responsibilities – what you are responsible for and what we as your accountants are responsible for.
• Recognise tax risks and issues – ensuring that proper documentation exists for all agreements and transactions and that taxpayers meet their lodgement and payment obligations.
• Seek advice – ensuring that you seek advice at appropriate times from us as your tax advisors to ensure that you meet the ATO’s requirements.

 

GOOD NEWS!

The good news is that our meticulous attention to detail guarantees that, should an ATO audit happen you will be in the best possible position to satisfactorily respond to their enquiries.

This includes:

• The workpapers we prepare each year to back up your Financial Statements and Tax Returns.
• The questions we ask about your financial transactions to ensure we understand them and classify things correctly.
• The advice we give which is up to date and correct for its purpose.

While sometimes you may feel that we have to ask you a lot of questions and request many documents from you, please be assured that this is our way of giving you the best possible protection and peace of mind over the long term.

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