Summary of our observations
Since the Next 5,000 program began, we have observed that most Next 5,000 groups and their advisers engage collaboratively and proactively with us. This is evidenced by the engagement throughout our reviews and the requests we receive for tailored technical assistance across a range of areas, including our key priority areas.
Our key observations of Next 5,000 groups reviewed to date are that:
- a high proportion have governance processes and procedures, but most are not documented
- clearly documented roles and responsibilities lead to good tax governance
- documentation of the tax return preparation, review process and identification of material transactions helps groups to recognise tax risks and issues to avoid errors
- private groups that seek tax advice for material risks and issues are more likely to make correct disclosures and adopt correct tax treatments.
Previously we've seen from our streamline assurance reviews that many Next 5,000 groups have a lack of documented governance processes and procedures. This includes a lack of clearly defined roles and responsibilities between the Next 5,000 group and their adviser. Where Next 5,000 groups don't have documented processes and procedures, we've observed that this has resulted in incorrect reporting of significant events, transactions, and activities.
While we only review tax governance in our streamline assurance reviews, our key observations can be applied more broadly. For example, we strongly recommend that all Next 5,000 groups and their advisers consider our findings and whether our recommendations may help them improve their governance to provide them with greater confidence in correctly reporting and complying with their tax obligations in the future.
In addition, through our Next Actions Strategy, Next 5,000 groups are generally willing to resolve incorrect reporting (including GST) during the streamline assurance review by making voluntary disclosures. This has resulted in fewer escalations to secondary reviews and to audits.
While we observe that the common tax issues have generally remained consistent to our findings as at 31 August 2023, this report provides more detailed insights.
Privately owned and wealthy groups
Privately owned and wealthy groups operate some of Australia's largest and most successful businesses and have complex financial and legal arrangements. We view privately owned and wealthy groups in the Next 5,000 sub-population as Australian resident individuals who, together with their business associates, control net wealth over $50 million. See also Tax performance programs for privately owned and wealthy groups.
Given the size and complexity of some of these groups, even one error can lead to a significant tax consequence.
The Next 5,000 sub-population:
- own over $1.6 trillion in net assets
- earn $367 billion in total income
- pay over $18.9 billion in income tax
- pay over $5.8 billion in net GST
- employ 1,455,120 people, paying $10.6 billion in PAYG withholding.
Generally, we've observed that the affairs of private groups are opaque because there are limited public disclosure obligations for such groups and less publicly available information. The structures of private groups are often complex, and the closely held nature of private groups enables quick, fluid, and easy group structural changes.
We are seeing an ageing demographic for controlling individuals of privately owned and wealthy groups, which is leading to an increased focus on succession planning and wealth transfer arrangements for these groups. The tax consequences that arise as a result are a focus for us. By engaging early with each other, we can build transparency and prevent mistakes.
For more information see What attracts our attention. We have also recently updated our Areas of focus 2024–25.