ATO set to further target businesses that fall within the top 500 (private and wealthy groups)

Wayne StaalATO, How to save tax

Utilising funding provided in recent budgets and updated data collection methods, the ATO will engage with private and high-wealth entities under the banner of the ‘Tax Avoidance Taskforce’.

Along with the top 500 Privately owned groups, the next 5,000 High Wealth Private Groups and medium and emerging private groups should also be on guard and expect engagement with the Australian Taxation Office.

The Tax Avoidance Taskforce ensures multinational enterprises, large public and private businesses (and associated individuals) pay the right amount of tax in Australia. Formed in 2016, it enhances and extends ATO’s existing activities to eradicate illegal and fraudulent tax arrangements.

The taskforce aims to:

  • detect tax avoidance to protect revenue and maintain the integrity of the tax system
  • increase transparency about how the ATO assess risk and administer the tax system
  • develop a better understanding of commercial drivers and the industries in which taxpayers operate
  • improve ATO data, analytics, risk, and intelligence capabilities to decide on and manage tax avoidance risk
  • keep the community informed of the ATO’s work in making public and private groups and wealthy individuals pay the right amount of tax in Australia.

So what does this mean for you… it means if you are a wealthy individual or group, you can expect the ATO will contact you to ensure you are paying the right amount of tax.

The ATO are also focused on targeting promoters of tax avoidance (like lawyers and accountants) who support or promote illegal behaviours and arrangements. The ATO work with partner agencies and other jurisdictions to collect and interegate likely taxpayers.

Importantly, the Top 500 represent just 0.2 of a percentage point of private groups in Australia, but are responsible for paying 10 per cent of tax. The ATO’s increased interest in these groups comes as a result of recent tax gap reports, which highlighted a 7.7 per cent tax gap in the sector worth $772 million.

As of July last year, the ATO had been in touch with 460 Top 500 groups, and has since initiated engagements with a further 80.

It is recommended that groups that may fall into the next 5,000 (see ATO link for their criteria) turn to their advisors, prepare early, focus on comprehensive record keeping, have conservative and documented logic for contentious claims (anything with part private use for example) and understand what tax risks are being flagged by the ATO. Any engagement with the ATO, whether you are proven right or wrong, will be costly in terms of time and tax agent fees to assist you handle the ATO’s detailed queries.

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