Action item update
Action item 20240916-3 – ATO to consider what opportunities exist for communicating to relevant stakeholders the distinction between investors and founders, and whether or not it is appropriate at law for founders to access the early-stage innovation companies concessions.
This item is closed.
Action item 20241119-1 – ATO to identify the key issues surrounding Family Trust Distributions Tax and to work collaboratively with members to consider areas of concern and opportunities to address issues via an out-of-session discussion in early 2025.
This item is closed.
Action item 20241119-2 – ATO to consider the application of the valuation guidelines in ESS 2015/1 (and whether amendments are required) to companies issuing shares that qualify for the start-up concession where the relevant company issuing shares is the head company of a group of entities.
This item is open.
Action item 20250319-1 – ATO to consider opportunities to further clarify the ATO website examples about how the retention of profits in a professional firm impacts the risk assessment criteria set out in Practical Compliance Guidelines PCG 2021/4 Allocation of professional firms profits- ATO compliance approach and provide a broader range of examples for how risk is assessed with the retention of profits in a professional firm.
This item is open.
Action item 20250319-2 – ATO to consider opportunities for additional public advice and guidance in relation to private equity and arrange an out-of-session discussion on potential topics.
This item is open.
Action item 20250319-3 – ATO to provide further guidance to support taxpayers on how to treat unpaid present entitlements (UPE) pending finalisation of the Commissioner of Taxation v Bendel [2025] FCAFC 15 outcome.
This item is open.
Action item 20250319-4 – ATO to consider whether the views expressed in an edited version of a private ruling reflect the ATO's general position on the interaction between look-through earnouts and the scrip-for-scrip rollover under section 124M of Income Tax Assessment Act 1997 (ITAA 1997), and if so, whether to confirm in public guidance.
This item is open.
Environmental scan
Members discussed recent developments and insights from members relevant to private groups.
The ATO has filed an application to seek special leave to the High Court for review of the decision of the Full Federal Court in Commissioner of Taxation v Bendel [2025] FCAFC 15. An updated Interim Decision Impact Statement has been published explaining the Commissioner of Taxation's administrative approach pending the outcome of the special leave application.
The 2024–25 Mid-Year Economic and Fiscal Outlook announced $76 million in funding over 4 years from financial year 2024–25 to modernise income tax reporting systems. For more information, see Modernising Tax Administration Systems (MTAS).
The group discussed whether the ATO would consider a United States incorporated company, when it is top hatted on an Australian resident group, an Australian resident for tax purposes.
A member raised a query regarding the ATO's web guidance on Practical Compliance Guideline PCG 2021/4 Allocation of professional firm profits – ATO compliance approach concerning an example involving profits retained by a practice entity. The ATO agreed to review the example and consider whether it would be appropriate to provide additional examples.
A member observed a trend of the ATO imposing administrative penalties at the recklessness level 50% more frequently and queried if this was due to a change of approach. The ATO advised there is no systemic change in how administrative penalties are applied, and noted all penalties are determined on the facts of the case.
Top 500 program
The group discussed impending changes to the Top 500 program following a comprehensive internal review. The ATO intends to update the definition of groups in the Top 500 program to ensure it is focused on the wealthiest private groups whose tax affairs are the most material. This change means that some groups in the program will be removed. There is an associated strategy for exiting those groups that no longer meet the definition.
Additionally, the ATO intends to implement a differentiated approach to obtaining assurance that the correct amount of tax is being paid, based on a group's categorisation as significant or general.
The ATO supports groups to achieve justified trust, including widening the provisional justified trust approach and clarifying the scope of refresh-year engagements that occur after the monitoring and maintenance period.
Members gave positive feedback but suggested web guidance for tax governance needs to be easier to navigate for tax agents and other stakeholders. The ATO confirmed that better guidance is a focus area for later in 2025.
Members asked about upcoming public communications regarding the changes. The ATO advised website content will be updated with information explaining the changes as a first step, followed by a webinar. Groups affected by the changes will also be advised directly by the case teams.
Private equity
The ATO provided an update on the domestic private equity program.
Risk-based reviews with taxpayers have started in the Next 5,000 private groups tax performance program and the Medium and emerging private groups tax performance program populations.
A new private equity ATO web page is in development and the ATO is considering the need for other public advice and guidance. More public advice and guidance would be helpful, an agreement to discuss potential topics in depth out-of-session was made.
The ATO will give a further update on the domestic private equity program later this year.
Reflections from the Commissioner
Commissioner Rob Heferen shared his reflections about his time in the role, including:
- the recently refreshed the ATO purpose and vision statements
- The ATO's purpose is to collect tax so the government can deliver services to the Australian community and the non-payment of debt impacts the Australian public more broadly.
- The ATO's vision is that every taxpayer meets their obligations because it is easy to comply, help is tailored, and deliberate non-compliance has serious consequences.
- the Australian Public Service Commission's recent capability review of the ATO and the findings that will help inform focus areas so that the ATO can fulfill its purpose in the coming years
- the vital role that tax agents and advisers play as partners in the tax system.
Members discussed the ATO's strategies for reducing the debt book, such as the more frequent issuing of director penalty notices, retention of refunds and opportunities for tax system improvements.
Commissioner of Taxation v Bendel
Members discussed the Full Federal Court decision in Commissioner of Taxation v Bendel [2025] FCAFC 15 including:
- practical implications for private groups and their advisers
- tax consequences that might arise depending on whether taxpayers convert unpaid present entitlements to complying loans for section 109N purposes
- the ATO's approach as outlined in the updated Decision Impact Statement
- areas where members would appreciate further guidance from the ATO pending the outcome of the special leave application. The ATO will consider what further practical guidance can be provided in the interim.
Succession planning and private groups
The ATO led a discussion on succession planning and the associated tax risks for private groups. The private groups market has an ageing demographic, and the ATO has observed an increase in succession planning activity and associated tax issues.
Some private groups have not adopted effective tax governance for succession plans, resulting result in unintended tax consequences. The ATO recommends regular reviews of succession plans to ensure they remain fit for purpose. This minimises the circumstances where unintended tax consequences arise or where groups seek to restructure to minimise or avoid tax when implementing the succession plan.
The ATO is updating succession planning web guidance to support private groups to adopt good tax governance and helping understand the behaviours, characteristics and tax issues that attract the ATO's attention in relation to succession planning.
Members commented that the proposed guidance is a great starting point. Members noted the importance of encouraging taxpayers to engage with tax advisers and lawyers on succession planning matters and they also noted the importance of taxpayers regularly reviewing and refreshing their succession plans.
Members suggested that messaging targeted at the next generation would be beneficial. Members also suggested the ATO consider additional guidance such as a webinar or practical examples on the tax considerations and risks associated with succession planning.
Small business future tax administration
The ATO has engaged broadly with small business, tax and BAS professionals, digital service providers and other bodies in the small business ecosystem as part of their key focus area to blueprint a future digitalised tax experience for small business.
Initiatives and pilots currently underway to begin implementing elements of a future digitalised tax experience include:
- shifting from quarterly to monthly GST reporting, primarily focused on small businesses with history of not complying with their tax obligations, and raising awareness in the small business market that voluntary monthly GST reporting is an option
- embedding guidance and rules into software by engaging in a pilot around embedding pay as you go instalment (PAYG) calculation into software
- providing more assurance and certainty to small business prior to lodgment that they are getting their tax right
- more purposeful use of third-party data, initially focused on taxable payments annual report (TPAR) data.
Members commended the initiatives that were outlined and queried if penalties and interest would apply if the PAYG instalment calculation is embedded into reporting software, but inconsistencies or omitted amounts were found. Questions surrounding the ability of pre-fill if TPAR is on an accrual basis instead of a paid basis were also raised. The ATO advised these considerations will be worked through as these initiatives continue and potentially grow from small pilots to larger scale projects.
Technical updates
The ATO discussed recently published public advice and guidance pieces.
Members commented on Draft Tax Ruling TR 2004/18DC Income tax: capital gains: application of CGT event K6 (about pre-CGT shares and pre-CGT trust interests) in section 104-230 of the Income Tax Assessment Act 1997, noting that expanding the examples and including guidance on how to do the calculations would be beneficial.
The ATO gave an update on current and upcoming public advice and guidance priorities linked to ATO key focus areas. Members noted the volume of public advice and guidance already underway and generally agreed with their priority. Members commented that guidance surrounding family trust issues in the private groups market should also be a key priority and that an awareness piece surrounding the 45-day holding rule would be beneficial.
Members were invited to identify other priority areas that the ATO should focus on.
Attendees
|
Organisation |
Members |
|---|---|
|
ATO |
Louise Clarke (Co-chair), Private Wealth |
|
ATO |
Andrew Watson, Individuals and Intermediaries |
|
ATO |
Jenny Lin, Private Wealth |
|
ATO |
Kasey Macfarlane, Private Wealth |
|
Accru Felsers |
Brett Cox |
|
Alvarez & Marsal |
Dang Kha |
|
BDO |
Michael Anderson |
|
Buildcorp Group |
Jeff Jones |
|
Chartered Accountants Australia and New Zealand |
Karen Liew |
|
CPA Australia |
Jenny Wong |
|
Deloitte Private |
Priyanka Subramanyam |
|
HLB Mann Judd |
Gaurav Chitnis |
|
John Fairfax Group |
Rob Jackson |
|
KPMG |
Belinda Cheesewright |
|
Law Council of Australia |
Tuan Van Le |
|
Moore Australia |
Varun Kumar |
|
Mutual Trust |
George Psarrakos |
|
Oatley Family Group |
Sharon Clark |
|
Piper Alderman |
Megan Bishop |
|
Pitcher Partners |
Alexis Kokkinos |
|
The Tax Institute |
Jonathan Ortner (Co-chair) |
|
William Buck |
Tim Lyford |
Guest attendees
|
Organisation |
Attendee |
|---|---|
|
ATO |
Amy James-Velagic, Objections and Review |
|
ATO |
Daniel Smith, Private Wealth |
|
ATO |
Glenn Cooper, Private Wealth |
|
ATO |
Kacey Jardine, Private Wealth |
|
ATO |
Karen Rooke, Office of the Chief Tax Counsel |
|
ATO |
Michael Morton, Small Business |
|
ATO |
Nina Cekulis, Private Wealth |
|
ATO |
Rob Heferen, Commissioner of Taxation |
|
ATO |
Vesna Circosta, Private Wealth |
|
Workpac |
Rachel Tyler |
Apologies
|
Organisation |
Member |
|---|---|
|
Tax Bar Association |
James Strong |
|
Workpac |
Judd Adams |