Armed with a financial boost from the Morrison Government, the ATO are hiring 200 more auditors to target Australia’s Top 500 privately held companies, Top 5,000 high wealth individuals and even emerging businesses, individuals and trusts.
The ATO considers privately owned and wealthy groups as:
- companies and their associated subsidiaries (often referred to as economic groups) with an annual turnover greater than $10 million, that are not public groups or foreign owned;
- resident individuals who, together with their business associates, control net wealth over $5 million.
Since the anti-avoidance taskforce began on July 2016, an additional $14 billion in tax liabilities have been raised by the ATO, with $8.2 billion (58.5%) from large private groups, companies and individuals.
These information request letters are expected to begin to be sent this week by the ATO, just in time for Christmas! The ATO will also be flagging additional “assurance reviews” during the first six months of 2020 on these clients. Where the ATO conducts an “Assurance Review” on a private group or individual, they will review all of the following areas:
- tax governance;
- processes; and
Specifically, in the Assurance Reviews, the ATO will conduct a “gap” analysis between the ATO’s “better practice” models and the current tax governance, processes, procedures, processes and controls of the group/individual being reviewed. The gap analysis conducted by the ATO will determine the risk rating for each area reviewed and also determine an overall risk rating score for the entity reviewed. The overall risk ratings available low, medium or high and will influence your future tax profile with ATO. An overall risk rating of high will be red flag to the ATO that the entity is a high risk and requires more diligent monitoring.
The following are just some of the information requirements the ATO will be requesting in order to gain an understanding of the Tax & GST governance of these private groups and individuals:
a) an explanation with supporting evidence of processes and controls in place providing the owner or management with oversight of tax compliance;
b) an overview of the systems and controls in place to ensure the financial and tax records of the group accurately reflect a true and fair view of the business and investment activities;
c) an explanation with supporting evidence of controls and processes in place to identify and mitigate new commercial and tax risks relevant to your group; and
d) details of any recent internal or independent audit, including a copy of the report and findings.
Tim Dyce, Deputy Commissioner of Tax for private wealth told, The Australian Financial Review on 2 December 2019, ”Get your house in order if you want to and you can make the process a bit less painful”.
Our experience of ATO audits of this nature can save you time and costs. We can conduct a Tax & GST Assurance review, based on the ATO’s gap analysis methodology to determine if there are significant areas that require improvement on to limit your risk rating with the ATO.
If you would like to discuss our Tax Assurance analysis and how it can help your clients please contact Mimi Ngo.