Our focus
Our key areas of focus are based on the risks and issues identified through our intelligence collection, risk detection and analysis, and case work. While we are focused on improving tax performance across all tax and superannuation compliance obligations for the privately owned wealthy groups population, these are the foundational, emerging and evolving risks and targeted focus areas where we intend to invest more resources towards 2024–25.
Foundational issues
Registration, lodgment and payment
- Not registering for obligations where required, or being registered under the incorrect basis (accounting basis or reporting cycle).
- Failure to lodge tax returns, fringe benefits tax (FBT) returns, or activity statements when required.
- Not paying tax debts on time and not engaging with the ATO.
Incorrect reporting
- Incomplete reporting of returns, activity statements and schedules (including information labels such as shareholder loans, assets and liabilities).
- Omitted income and sales (income tax and GST).
- Ineligible research and development (R&D) expenditure being claimed.
- Ineligible R&D activities being claimed.
- Incorrectly claiming base rate entity status.
Tax advisers and professional firms
- Failure to lodge own tax returns or business activity statements (BAS).
- Failure to lodge partnership returns or statements of distributions.
- Failure to pay own tax debts on time.
- Inappropriate allocation of professional firm profits (PCG 2021/4).
- Intermediaries (including R&D consultants) encouraging aggressive tax arrangements or promoting tax avoidance or exploitation schemes.
Division 7A
- Unreported shareholder loans.
- Non-complying loan agreements.
- Failure to make minimum yearly repayments or not applying the correct benchmark interest rate.
- Inadequate record keeping.
- Section 109R loan repayment arrangements including loans repaid just before the private company’s lodgment day, with the intent to reborrow similar or larger amounts from the same company.
- Requests for section 109RB discretions.
Capital gains tax (CGT)
- Eligibility criteria when claiming small business CGT concession.
- Inappropriate calculations of the CGT discount.
- Using the small business restructure rollover (Subdivision 328-G) incorrectly, including for reasons other than a genuine restructure of an ongoing business.
- Capital losses from related party transactions (market value substitution rule).
- Incorrect application of Division 855 (non-resident access to concessions).
Property and construction
- Capital versus revenue misclassification on disposal of real property.
- Omission of income on disposal of real property.
- Failure to lodge or report sales or GST on their income tax return or BAS as identified by the taxable payments reporting system.
- Misreporting or underreporting of GST for real property.
- Failure to meet GST reporting obligations for real property.
- Failure to meet GST registration obligations for real property.
International transactions
- Intangible migration arrangements.
- Mischaracterisation of service transactions which results in mispricing and creates risk from a corporate residency and controlled foreign companies' perspective.
- Withholding tax compliance.
- Significant global entity compliance.
- Related party financing (including concerns with the use of non-commercial terms to push up financing costs in the property and construction industry).
Other domestic transactions
- Non-arm’s length income in self-managed super funds.
- Misinterpretation or disregard for family trust elections.
- Residents not including distributions from foreign trusts (Section 99B).
- Franking account balance discrepancies.
- 45 day holding rule (franking credit integrity rules).
Emerging or evolving risks and issues
Incorrect reporting
- Over-claimed deductions claimed by trusts that inappropriately reduce trust net income.
- Increasing lodgments in industry sectors where R&D activities and expenditure may not be eligible.
- Incorrectly claiming GST credits on employee allowances.
Capital gains tax
- Division 149 (pre-CGT asset).
- Reduction in capital gains and losses arising from CGT events in relation to certain voting interests in active foreign companies (Subdivision 768-G).
Other emerging areas
- Inappropriate use of private ancillary funds to hide wealth, offset CGT events, or extract other tax benefits by moving taxable income or assets through not-for-profit vehicles.
- Trust loss trafficking (inappropriate generation and use of losses).
- Share buyback arrangements.
- Thin capitalisation rules.
- Cryptocurrency based business models.
- $3 million cap on super.
Targeted focus areas
Succession planning
- Continue our focus on risks that are arising in relation to the ageing demographic and succession planning.
Private equity
- Risk across the life of the private equity investment, including all private equity participants (firms, funds, target entities and investors) at different stages of the private equity lifecycle (pre-acquisition, acquisition, holding, pre-exit and exit).
Retirement villages
- Reviewing the GST and income tax through the lens of the retirement village cycle.
- Incorrect application of GST-free provisions.
- Incorrect application of Division 135 (supplies of going concern).
- Related party transaction and incorrect valuations between related parties.
- Contentious land-lease structure.
GST focus areas: retail and construction
- Incorrectly reporting GST in supplies and acquisition.
- Incorrectly reporting GST on supply of goods.
- Incorrectly reporting commercial and trading adjustments.
- Intragroup transactions (within a private group).