Noting that the ATO has released its approach to ensuring wealthy Australians and their private groups pay the right amount of tax (see the separate announcement in this issue of TaxVine), Acting Second Commissioner Michael Cranston said the ATO is taking a prevention-before-correction approach and ramping up face-to-face engagement with key taxpayers to protect revenue: ATO media release 16 April 2015.
The ATO is shifting its approach and will be visiting the largest private groups to look at their tax affairs in real time, raise any concerns and resolve issues before companies lodge their tax returns.
There are about 175 private groups controlling almost 6000 entities with more than $1 billion in turnover or $500 million in net assets and the ATO will begin its visits by the end of the month.
The ATO risk-reviews all wealthy Australians and their private groups. About 30% are considered high-risk and the ATO regularly ensures they are compliant through reviews, audits and the provision of advice.
On 16 April 2015 the ATO announced that the ATO will sign-off on the previous year’s tax returns of taxpayers who have been open and transparent with the ATO about their affairs, have good compliance records and are considered low-risk. This will provide certainty for about 30,000 privately owned and wealthy groups that they will not be subject to audit for specific income years.
Broadly, the following behaviours may attract the attention of the ATO:
- tax or economic performance is not comparable to similar businesses
- low transparency of tax affairs
- large, one-off or unusual transactions, including transfer or shifting of wealth
- a history of aggressive tax planning
- tax outcomes inconsistent with the intent of the law
- choosing not to comply or regularly taking controversial interpretations of the law
- lifestyle not supported by after-tax income
- treating private assets as business assets
- accessing business assets for tax-free private use
- poor governance and risk-management systems.
For more information go here.