Audit, review, and voluntary disclosure results
During the 2024 financial year, we finalised 22 reviews and 25 audits. As of 30 June 2024, 26 audits and 28 reviews were in progress.
Income tax liabilities of $552.5 million were raised during the 2024 financial year. Of the liabilities raised, $41.3 million were from voluntary disclosures.
During the period 1 July 2019 to 30 June 2024, we raised liabilities totalling $1.55 billion.
Figure 1: Income tax liabilities raised during the 2020–24 financial years
The income tax liabilities raised from the Top 500 population are:
- $52.6 million in 2020
- $308.07 million in 2021
- $395.92 million in 2022
- $241.5 million in 2023
- $552.5 million in 2024.
Audit yield (cash collections arising from our assessments) of $316 million was collected this financial year. For the 2020 to 2024 financial years, we collected $791.4 million. Wider revenue effects (representing future tax impacts of amended assessments) realised this financial year were $14.6 million, totalling $143.3 million since the 2020 financial year.
Total revenue effects for the 2020–24 financial years
|
Revenue type |
Financial year ending 2020 |
Financial year ending 2021 |
Financial year ending 2022 |
Financial year ending 2023 |
Financial year ending 2024 |
|---|---|---|---|---|---|
|
Audit yield collected ($ millions) |
$25.4m |
$113.6m |
$138.6m |
$197.8m |
$316m |
|
Wider revenue effects ($ millions) |
$19.6m |
$78.1m |
$12.1m |
$18.9m |
$14.6m |
Figure 2: Total revenue effects for the 2020–24 financial years
Our audit and review work highlights some of the more complex tax matters affecting Top 500 groups, together with the tax positions adopted. These matters include:
- arrangements that may be designed to obtain a franking benefit (for example, a refund of franking credits), including where the qualified person test has been overlooked or misapplied
- arrangements that may be designed to circumvent the operation of integrity provisions related to unpaid present entitlements and loans made to shareholders and their associates
- related party transactions with self-managed superannuation funds
- international tax matters, including the application of the controlled foreign company provisions, transfer pricing and intangibles migration
- consideration of how the family trust distribution tax provisions are applied
- complex deductibility matters, including related party service or management fee arrangements and where deductions are sought for private pursuits/activities using controlled businesses.
Where groups choose to enter these types of complex arrangements, they sometimes have difficulty substantiating the tax position(s) adopted. This can lead to protracted and costly audit action, together with potentially exposing the group to significant tax liabilities, penalties and interest.
Voluntary disclosures
During the 2023–24 financial year, Top 500 groups provided 25 voluntary disclosures that led to an increase of $41.3 million in tax liabilities. 84% of the voluntary disclosures relate to non-complex errors that could easily have been avoided through basic tax governance processes and procedures. These matters included:
- omitted income (for example dividend and trust income)
- overclaiming deductions due to using an incorrect version of the financial records to prepare the tax return
- understated interest income from non-arm’s length (related party) loans
- incorrect calculation of capital losses
- incorrect reporting of capital works and capital allowance deductions.
Importance of effective tax governance
Top 500 groups control significant amounts of wealth across a range of different industries. In many cases they have large and complex structures consisting of many entities.
Given the economic size of the Top 500 groups, small errors can have a big tax impact. Effective tax governance helps to ensure Top 500 groups get the basics right. 2023–24 data shows 68% of the groups that made errors requiring a voluntary disclosure and 90% of the groups that had additional liabilities raised from audits had minimal or no tax governance.
To avoid costly errors and ensure that the correct amount of tax is being paid, we recommend privately owned and wealthy groups implement tax governance and review it regularly to ensure it's operating effectively.
Tax governance that is documented, operationally effective and regularly reviewed gives us, and the controllers of Top 500 groups, confidence the groups will continue to get things right and mitigate tax risks.
To help Top 500 groups understand and implement the criteria for effective tax governance, we've published guidance that explains:
- the importance of effective tax governance and our approach
- required items for effective tax governance
- additional items for effective tax governance
- further guidance and practical examples