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  • Privately owned and wealthy groups

    Privately owned and wealthy groups include private companies, trusts, partnerships, super funds and other entities that are connected with each other and have common ownership.

    There are approximately 232,000 groups linked to over 1.2 million entities or individuals that make up privately owned and wealthy groups. These entities or groups have income exceeding $2 million or more than $5 million in net wealth.

    Consistent with the control and operating models typical in privately owned and wealthy groups, we focus on working with clients at a whole-of-group rather than at the individual entity level. Our approach is to work in an open and transparent way with clients so that we can understand their circumstances, offer the right services and work with them to ensure they get things right. Our services include a range of information and personalised services to assist in the mitigation of tax risks that we see. We also carry out reviews and audits on the highest risk groups to ensure they meet their tax obligations.

    Indicators of participation

    Correctly registering in the system

    Our close monitoring and analysis of entities within the privately owned and wealthy groups population indicates that the majority of privately owned and wealthy group entities are registered in the tax and superannuation systems.

    Lodging tax information on time

    Privately owned and wealthy groups generally lodge their income tax returns and other statements through a tax agent, with the majority of privately owned and wealthy groups lodging their income tax returns and business activity statements on time.

    Reporting complete and accurate information

    Our pre-lodgment advice services and key taxpayer engagement programs are designed to resolve potential disputes and errors before lodgment and to support complete and accurate reporting of information when returns are subsequently lodged.

    Our compliance program focuses on higher risk taxpayers and transactions and we conduct reviews and audits to confirm information reported to us.

    Paying tax obligations on time

    The majority of privately owned and wealthy groups pay their debts to the ATO on time.

    How we are making it easier

    Better ways to get advice

    Our early engagement for advice service provides clients and their advisers with the opportunity to engage our specialist officers to discuss technical issues associated with complex transactions being considered before they are implemented. This service allows clients to send us a request for advice or to request a call back from one of our specialists. These discussions allow us to better understand the client’s circumstances, work together to resolve issues and determine our additional information requirements as quickly as possible.

    We completed 161 formal early engagement for advice requests from privately owned and wealthy groups and responded to a further 214 enquiries about the service over the year. We also improved our online content during the year to make it easier for clients to request advice or a call back.

    The success of the service is highlighted by increasing demand from private groups. Other client groups have also requested access to the service, and we extended it to small businesses and individuals in September 2016.

    Helping clients to get things right

    We have continued with our program of practical compliance guidelines. These guidelines are designed to provide practical certainty for significant law administration issues in situations where the law is uncertain or imposes a high compliance cost burden on clients. These guidelines enable clients to position themselves within approaches that we describe as low risk and unlikely to require scrutiny.

    During the year, we finalised three practical compliance guidelines addressing:

    • a simplified approach for calculating car fringe benefits for fleet cars
    • the valuation of housing fringe benefits provided by retirement village operators
    • the tax effects of retirement village operators making capital growth payments.

    Draft practical compliance guidelines were also issued on fixed entitlements and fixed trusts, as well as dividend equivalent payments under an employee share scheme.

    We encourage clients to think about incorporating a focus on tax in their business governance practices. To assist clients we have updated our tax governance guide for private groups. The guide provides practical advice on the key features of a good governance model. It is designed to help clients understand the role that good governance can play in assisting them to mitigate tax risks that might arise in their day-to-day business and family dealings. This includes tax risks resulting from significant transactions such as business acquisitions and disposals.

    Privately owned and wealthy group clients are able to access a range of tailored information and tools online designed to help them to understand and meet their obligations. To make it easy for privately owned and wealthy group clients to access information and services we have created a dedicated section on our website. We update our web content, including the What attracts our attention and What you should know sections regularly throughout the year as new issues arise, so that clients always have access to the latest information.

    Informing the market of areas of concern

    We use Taxpayer Alerts to warn our clients about new or emerging issues that we are concerned about. Our aim is to share our concerns as early as possible to help businesses make informed decisions about their tax affairs and to stop the proliferation of tax schemes. Each Taxpayer Alert describes an issue, our concerns, and what we are doing about the matter.

    In 2016–17, we issued alerts on a wide range of topics relevant to privately owned and wealthy groups, including:

    • the use of non-profit foundations
    • diverting personal services income to self-managed super funds
    • trust income reduction arrangements
    • the incorrect use of the research and development tax incentive.

    The Research and Development Tax Incentive program is co-administered with AusIndustry. We have collaborated with them to provide targeted guidance and advice to assist taxpayers to make correct research and development tax incentive claims.

    We worked with AusIndustry to produce four new guidance publications to assist companies and their advisors to better understand the legislative requirements and correctly register activities. These publications cover software development, agriculture, building and construction and mining.

    We issued Taxpayer Alerts addressing concerns we had about some claims in a number of industries including the construction, agricultural and software development industries. We also issued a Taxpayer Alert to help clients distinguish research and development expenses from ordinary business activities.

    The publications have been welcomed by the research and development industry because they provide better information on how to correctly utilise the incentive.

    Delivering contemporary and tailored services

    Key taxpayer engagement

    Effective early engagement helps resolve issues. For our largest 320 privately owned and wealthy groups, we have continued to deploy a relationship management model that provides each group with access to a client manager. This one-on-one service is designed to help us build our understanding of clients, their industry and structures, and supports better engagement with the ATO. It provides private groups with the opportunity to discuss their tax positions prior to returns being lodged, and the tax implications of key transactions as they occur throughout the year.

    Clients benefit from this approach as it reduces the need for more traditional compliance activity, including reviews and audits, and provides real-time, pre-lodgment certainty. It also gives us greater confidence that the right amount of tax is being paid. We calculated this year that once fully deployed across all of our largest 320 privately owned and wealthy groups, this approach will reduce the burden of compliance costs by an estimated total of $23 million per annum.

    As we become aware of significant commercial deals involving privately owned and wealthy groups we offer to work with clients. Understanding the nature of the deal and working with clients as the transactions are in the planning phase or as they occur, helps to prevent errors and disputes. During the year, we have worked with clients on 150 significant commercial deals.

    Recognising the significance of the construction industry and the tax issues specific to that sector, we have introduced a number of tailored initiatives during the year. We engage one-on-one with the largest construction groups on their income tax and GST obligations. We work with those same clients to influence positive behaviours with their sub-contractors across their tax obligations, including payment of tax debts. To support the one-on-one engagement approach, we have trialled the use of multi-functional teams to ensure that contact from different parts of the ATO is better coordinated. To prevent potential compliance issues, major new construction developments are identified in real time, and early engagement is offered to resolve any tax issues. Finally, we established a liaison forum this year to promote meaningful relationships with key advisers in the building and construction industry and to provide opportunities for joint approaches to address common issues.

    Our compliance program

    In 2016–17, we raised $3.3 billion in liabilities and collected payments totalling $2.5 billion from our compliance activities for privately owned and wealthy groups. Our compliance program focused on dealing with higher risk behaviours and transactions, aggressive tax planning arrangements, profit shifting and non-compliance in claims for the research and development tax incentive.

    Dispute resolution

    We made a concerted effort to resolve often highly complex disputes involving privately owned and wealthy groups, including using alternative dispute resolution methods. We resolved 79 cases involving privately owned and wealthy groups throughout 2016–17.

    We use a range of assurance mechanisms to ensure we make sound and appropriate settlement decisions.

    See Resolving disputes for more information.

      Last modified: 30 Oct 2017QC 53653