What
The ATO is renewing their focus on privately owned and wealthy groups under their four-year “Next 5,000” tax review programs.
Am I wealthy?
A privately owned and wealthy group is defined by the ATO as:
- companies and associated subsidiaries with an annual turnover greater than AUD$10 million; or
- individuals who, together with their business associates, control net wealth of over AUD$5 million.
What are they looking for?
Instead of reviewing particular identified risks, the ATO has changed its approach. Under this program, the ATO’s focus is on establishing justified trust that each entity has paid the right amount of tax.
That is, their focus is now on ensuring that businesses and wealthy individuals have documented processes in place to demonstrate that the WAY they prepare their accounts and tax returns means that the ATO can trust that they are correct.
How do I gain the ATO’s trust?
In determining whether you have established “justified trust” the ATO will review the following four key areas:
- your tax governance framework;
- any new transactions and their tax outcomes; and
- any differences between accounting profit and taxable income.
Most private groups do not yet have a detailed and documented tax governance framework. Notwithstanding, the ATO has made it clear that the tax governance framework will be one of the first things that the ATO will ask about at the commencement of a review of a private group.
What is a tax governance framework?
A tax governance framework is a series of documents that evidences the way that an organisation:
- understands its tax obligations;
- has appropriate controls and processes to identify, assess and mitigate tax risks;
- seeks advice;
- ensures integrity in reporting;
- maintains effective records and documentation;
- ensures that behaviour is ethical and responsible.
Need help?
As always we are here to help! We can assist you to prepare your tax governance framework, to ensure that any ATO review is streamlined, saving a significant amount of time and cost.