Over the next month, the ATO will contact selected businesses and entities that now meet its criteria for medium and emerging private groups.
Overview of the medium and emerging private groups tax performance program
The medium and emerging private groups tax performance program is designed to support these groups in meeting their tax obligations. The program covers private groups linked to Australian resident individuals who, together with their associates, control wealth between $5m and $50m, and businesses with an annual turnover of more than $10m that are not public or foreign owned.
The ATO uses a risk-based approach to identify groups with higher risk and consequence tax reporting, supporting them in meeting their tax obligations. This approach aims to strengthen community confidence that these groups are paying the right amount of tax. The program has improved the ATO's knowledge and understanding of business operating environments, tax risks, and issues that are present or may be emerging
The program focuses on engaging with larger and higher-risk private groups and entities, private groups experiencing rapid growth, increasing foreign links, looking to expand offshore, or where controlling individuals are transitioning to retirement
Key areas of focus
- Trusts: Businesses with trusts in their structure should revisit their governance and understand which trust activities may attract the ATO's attention.
- Division 7A: Ensure compliance with Division 7A arrangements by completing annual checks. Look out for incorrect reporting, non-compliant loans, incorrect benchmark interest rates, and reborrowing from a private company to make repayments on Division 7A loans.
- CGT concessions: If restructuring and looking to access CGT concessions, businesses should check their eligibility each year before applying.
- Income reporting: Businesses must ensure all income is reported correctly. Any mistakes should be corrected or amended in their return.
In the 2020-21 income year, the Tax Avoidance Taskforce which includes the medium and emerging private groups program, helped raise approximately $1.5b in tax liabilities from privately owned and wealthy groups
What you need to do
Taxpayers are receiving these letters just in time for Christmas and it is important to ensure you are well prepared for the full request for information in the new year. Failure to prepare can result in serious outcomes for taxpayers and protracted and costly ATO engagements.
If your business is contacted by the ATO, reach out to your Grant Thornton partner to discuss your obligations and ensure compliance.
We can proactively engage with you to review your business's governance, Division 7A arrangements, CGT concessions eligibility, and income reporting practices to avoid common errors.
Learn more about how our Tax services can help you
