This news brief prepared by Vicca Chartered Accountants is a short synopsis of the Australian Taxation Office’s position on what attracts their attention when it comes to privately owned or wealthy family groups.
The ATO has published a set of criteria and behavioural traits that attracts their attention and increases the risk of audit activities in relation to group activities. Herein below is a non-exhaustive list of items indicated by the ATO.
The taxation vs economic performance of the enterprise is not comparable to similar businesses in their industry.
The taxpayer demonstrates low transparency relative to their taxation affairs.
The taxpayer has large one-off or unusual transactions including the transfer or shifting of wealth between entities.
The taxpayer has a history of aggressive tax planning.
The taxpayer’s tax outcome is inconsistent with the intention of the taxation legislation.
The tax payer chooses not to comply in the areas of lodgement, FBT, CGT, BAS, Div. 7A etc.
The taxpayer demonstrates taking controversial interpretations of the taxation law contrary to that of the ATO.
The lifestyle of the tax payer and their associates is not supported by their after-tax income.
The taxpayer has access to business assets for free private use which in the commercial environment would not be available.
The key areas of attraction of the ATO for this financial year for family enterprises continues to be private company profit extraction by method other than dividends ie. the provisions under the Div7A loans and UPE’s (Unpaid Present Entitlement). The ATO reviews a suite of information, including social media platforms, for clues as to inconsistent behavioural traits of tax payers and their associates. As is always the case, the ATO will be reviewing Fringe Benefit Tax’s, R&D claims, restructuring of self-managed superfunds and tax consolidation de-merges as key risks to taxation revenue.
One cannot sufficiently stress to taxpayers the importance of:
Lodging all compliance returns on time.
Paying all compliance on time or entering into a repayment program and meeting those programs as negotiated.
When an audit does arise, taxpayers need to be meticulous and methodical in their responses to the ATO. Not enough information can cause doubt and too much information can cause further unnecessary enquiries. Where possible, responses should be concise and direct, avoiding ambiguity where possible. Proper risk assessment of businesses is an important method to determine the risk profile to the Australian Taxation Office.
If you would like more information on this or any of the above, please do not hesitate to contact Noe Vicca on 07 3221 9444, 0412 642 017 or firstname.lastname@example.org.
Disclaimer: The contents herein are intended for general information only and should not be construed as legal or accounting advice. Vicca Chartered Accountants Brisbane bears no responsibility for any loss that might occur from reliance on information contained in this publication. Please do not reproduce, transmit or distribute the contents herein in any form without prior permission from Vicca Chartered Accountants, Taxation Accountants Brisbane Australia.
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