ATO’s Next 5,000 Private Wealth Combined Assurance Reviews
The ATO’s high wealth private groups (HWPGs) review program, the Next 5,000 is currently underway and should not be ignored as just another ATO initiative. Reaching a broader range of private groups, the Next 5,000 program targets Australian resident individuals who, together with their associates control wealth of $50 million or more.
Many accountants have already received notification letters advising of the ATO’s intention to conduct comprehensive “Combined Assurance Review” or CARs during the current financial year.
These notification letters are intended to provide HWPGs and their Advisors time to get their house in order. Underpinning these reviews is the concept of “Justified Trust” adopted by the ATO from the OECD.
Governance is the key to these reviews. It is not just about the HWPGs’s documented processes, procedures and policies to ensure that they are correctly reporting and paying income tax and GST, but also being able to demonstrate that their systems will pick up errors or significant transactions to be addressed further.
A low assurance rating or “red flag” is likely to result in further ATO action, so it is imperative that HWPGs and their advisors start preparing. There are second chances to this CARs process and the scheduled stages of these reviews means that there is often significant resources and time costs associated required within a tight timeframe to respond.
First and foremost, is to be prepared. Where a HWPG is assessed at a low assurance level, these reviews can soon turn into lengthy and costly disputes and will impact the level of ATO scrutiny of the group going forward.
Where you have client(s) that are likely to fall within the Next 5,000 private wealth groups segment, there are practical actions that can be taken to prepare for these assurance reviews.
Proactive actions you can take to prepare include:
- Conducting a gap analysis by assessing your tax governance framework and controls compared to ATO best practice guidelines to determine areas where you can improve.
- Assessing any tax risks flagged to the market and documenting how these risks have been managed where they apply to your group.
- Formally documenting your tax risk management and governance framework and/or tax processes with regard to the size and complexity of your group.
- Ensuring that all contemporaneous documentation and advice has been retained and collated that supports the tax treatment of your significant or new transactions.
- Reviewing all material tax and GST transactions and BAS adjustments to ensure they are explainable and supported by documentation.
Typically these reviews cover two financial years and/or 3 consecutive BAS periods. Where gaps or risk areas are identified, seek further advice to mitigate and manage these potential deficiencies.
For further details on the above, and how we can assist in preparing your private wealth clients please contact Mimi Ngo.