About the program
We use a risk-based approach to:
- identify groups with higher risk and consequence tax reporting
- support them in meeting tax obligations.
By doing this we strengthen community confidence that they are paying the right amount of tax.
Information and findings we gather from working with medium and emerging private groups improves our awareness of the population and risk environment. It also complements our development of a range of differentiated response strategies.
Through the medium and emerging private groups tax performance program, we have improved our knowledge and understanding of:
- business operating environments
- tax risks and issues that are present or may be emerging.
We have learned from our work across the different industries and risks over the past few years. We are well-positioned and capable to respond to existing and emerging risks and issues with effective strategies and tailored activity.
Who is covered by the program
The program covers both:
- private groups linked to Australian resident individuals who, together with their associates, control wealth between $5 million and $50 million
- businesses with an annual turnover of more than $10 million, that are not public or foreign owned and are not linked to a high wealth private group.
Our focus is on engaging with:
- larger and higher risk private groups and entities
- private groups experiencing rapid growth, increasing foreign links, looking to expand offshore or where controlling individuals are transitioning to retirement
- foreign investment focussed on acquiring high value assets in Australia and structured wealth extraction
- private groups with higher risk issues or concerns.
The program doesn't cover private groups or businesses that are already part of the:
We use data-matching and analytic models to identify wealthy individuals and link them to associated entities. We consider the group of entities together.
The private group approach helps us understand your business better. It enables us to provide a tailored experience, including focusing on specific potential areas of risk and entities within the group.
For more, read about the:
How we tailor our approach to you
We continue to improve our understanding of medium and emerging business and the environment within which you operate.
To support our understanding, we use sophisticated data and analytics techniques. We use intelligence and insights gathered through our engagements to identify trends, priority and emerging risks specific to medium and emerging private groups.
Through our increased understanding, we tailor our approach and develop strategies to support you to identify and mitigate tax risks within your private group.
We'll work with you by:
- letting you know about issues that attract our attention
- publishing public advice and guidance on tax issues for medium and emerging private groups
- providing certainty on significant commercial deals through early engagement and pre-lodgment agreements
- conducting risk-based leveraged strategies, reviews and, where appropriate, audits.
Types of engagement you can expect
Our engagement with you may include:
- review of areas of correct tax reporting risk specific to your business
- pre-lodgment compliance agreement for commercial deals and restructure events
- leveraged engagements for areas of potential risk that are generally more easily resolved.
We will work with you to resolve any concerns or issues that arise from our risk modelling and analysis of data from:
- income tax returns
- business activity statements (BAS)
- third party data sources.
Reviews
We will streamline our engagement with you for simple issues and potential risks. We may require an extensive review for complex matters involving multiple issues and risks.
Our reviews focus on specific risks and issues. In most cases, we aim to complete our reviews within 180 days.
Reviews generally focus on issues that can be resolved by getting more information from you. For example, this could be completing a specific action such as lodging an outstanding return or schedule.
We monitor many potential risks and issues. Some focus areas include:
- where we have identified income from third-party information attributable to you but did not see this income reported on your tax returns or activity statements
- where an entity in your group has not lodged tax returns or activity statements resulting in a shortfall of tax paid
- late or incorrect lodgments of tax returns, schedules or activity statements
- instances where you do not appear to have enough income to cover your expenses or to acquire the assets that you own
- inappropriately accessing tax concessions, credits and offsets that you are not entitled to
- large, one-off, or unusual transactions, including the transfer or shifting of wealth
- trust structures
- wealth extraction, including Division 7A, where we seek verification of complying loan agreements, genuine repayments and minimum yearly repayments.
While we encourage and support good tax governance, it's not a risk factor we consider in the program reviews.
GST integrated reviews
We also undertake several goods and services tax (GST) integrated reviews as part of the program.
These reviews consider potential GST risks, concerns or issues. We will request information and documentation from you in support of your GST treatment.
Characteristics of medium and emerging groups
Medium and emerging groups have certain characteristics and attributes. See more about the:
Overall demographics
There are around 210,000 private groups that are part of the program. These groups report holding approximately $2.2 trillion in net assets and contributing more than $40.1 billion in tax revenue.
A typical medium and emerging group consists of 5 entities with a mix of:
- companies
- trusts
- other entities.
The profile of a typical medium and emerging group includes:
- 5 entities consisting of 2 companies, 2 trusts and another entity such as a self-managed super fund
- individuals
- a group head aged 63 years old
- 12 employees
- total income of $653,000
- net wealth of $7.6 million
- income tax of $84,300
- net GST of $18,200
- pay as you go (PAYG) withholding of $93,500.
Typical medium and emerging group
Groups by location
The population is mainly located on the east coast (over 83%) and distributed across Australia as follows:
- New South Wales – 80,617
- Victoria – 64,706
- Queensland – 29,337
- Western Australia – 17,474
- South Australia – 11,769
- Australian Capital Territory – 3,393
- Tasmania – 2,311
- Northern Territory – 696
Medium and emerging groups by location
Groups by entity type
The program includes more than 1.2 million entities. Group structures may be complex and some groups may have many associated entities.
There may be a combination of various entity types with companies, partnerships and trust structures operating within and outside of consolidated groups.
The program includes:
- 389,138 companies
- 359,764 individuals
- 286,899 trusts
- 125,008 super funds
- 57,674 partnerships.
Medium and emerging groups by entity type
Groups by industry
A wide range of different industries are represented in the population. The 5 main industries represent more than half of businesses.
The industries include:
- other industries – 28%
- financial and insurance services – 23.7%
- professional, scientific and technical services – 8%
- agriculture, forestry and fishing – 6.7%
- construction – 6.3%
- health care and social assistance – 5.8%
- rental, hiring and real estate services – 4.5%
- retail trade – 4%
- wholesale trade – 3.8%
- manufacturing – 3.6%
- accommodation and food services – 1.7%
- transport, postal and warehousing – 1.3%
- other services – 1.1%
- administrative and support services – 1%
Medium and emerging groups by industry type
How much tax they pay
The population:
- owns $2.2 trillion in net assets
- earns $869 billion in total income
- pays over $40.1billion income tax
- pays over $15.7 billion in net GST
- employs more than 5.2 million people, paying $35.4 billion in PAYG withholding.
Tax governance and reporting
Effective tax governance means having oversight frameworks with clear processes and procedures. This supports decision making and ensures you meet your tax and super obligations.
When we engage with you as part of the medium and emerging program, we don't consider or review your tax governance processes. However, taxpayers who have good tax governance generally have a more streamlined and efficient review than those who don't.
To ensure your risks are mitigated and to improve certainty that the group is paying the right amount, you need:
- good tax governance
- internal controls
- business processes and procedures.
Clearly defining and documenting the roles and responsibilities within a group and sharing them with advisors is a key governance requirement.
To ensure correct tax treatment and reporting, it is important to maintain:
- oversight and independent approval of the preparation of tax returns and BAS
- segregation of duties with review
- checking of material transactions.
Well-designed control systems and reporting frameworks with good governance, checking and review are key to:
- ensuring accurate treatment
- record keeping
- identifying errors or mistakes and correcting them.
In broad terms a business with a focus on ensuring risk and issue mitigation will apply:
- well-designed and documented corporate and tax governance frameworks
- internal controls and compliance practices appropriate to the size and complexity of the business
- systems that respond to business growth and increasing complexity through improvement in governance focus and sophistication, internal controls, recording and reporting
- use of automated and integrated business systems that are regularly reviewed for suitability and accurate performance
- suitably capable and skilled personnel with regular development and ongoing responsibility to understand, manage and report tax obligations
- segregation of duties across reporting and approval functions
- regular review and reconciliation of business systems reporting
- review of the tax treatment of large, unusual and irregular transactions
- established procedures for monitoring tax reporting and correcting mistakes and errors
- ensuring that large, unusual and irregular transactions including those between group members and associates, are properly recorded and included in tax returns
- seeking advice as business grows and for the treatment of new, unusual, one-off and large transactions.
For more information you can:
- read about corporate governance and tax governance
- work out how to correct a mistake.
For more support, see:
How we support medium and emerging private groups to meet their tax obligations.