Private Groups Stewardship Group key messages 24 July 2025

Action item update

Action item	20241119-2 – Valuation of Employee Share Schemes (ESS)
Description	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.
Responsibility	ATO
Status	Open

 

Action item	20250319-1 – Professional firms – retention of profits
Description	The 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.
Responsibility	ATO
Status	Closed The ATO has considered the existing web content and current examples involving retention of profits. We agree that it is appropriate to update and clarify the content and examples to highlight that the impact of the retention of profits within a firm on the risk assessment under the PCG will depend on varying facts and circumstances

 

Action item	20250319-2 – Private Equity
Description	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.
Responsibility	ATO
Status	Open

 

Action item	20250319-3 – Comms and guidance in relation to Bendel
Description	ATO to provide further guidance to support taxpayers on how to treat unpaid present entitlements pending finalisation of the Commissioner of Taxation v Bendel [2025] FCAFC 15 outcome.
Responsibility	ATO
Status	Closed The following article and content was published on the ATO website shortly after the last meeting: Deputy Commissioner Louise Clarke discusses Bendel decision. The article complements the guidance outlined in the ATO’s Interim Decision Impact Statement.

 

Action item	20250319-4 – Section 124M Guidance
Description	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 124-M of Income Tax Assessment Act 1997 (ITAA 1997), and if so, whether to confirm in public guidance.
Responsibility	ATO
Status	Closed The view expressed in the edited version represents the ATO view based on the facts and circumstances of that particular matter. The ATO position is that section 124-M scrip-for-scrip rollover can apply in relation to shares acquired as part of the financial benefits received through a look-through earnout right. However, it is dependent on the facts and circumstances in any given case. We don’t see this issue arising frequently in our interactions through compliance activities and advice and guidance requests, and it is not an issue that is prioritised for public advice and guidance at this time. We will continue to monitor cases and advice requests and reconsider the need for public advice and guidance (PAG).

Environmental Scan

Members discussed recent developments and insights relevant to private groups.

• The Economic Reform Roundtable was held between 19 and 21 August 2025 in Canberra to support and shape the government’s growth and productivity agenda.
• Partnership returns lodgment software has been updated and all statements of distributions for partners to a partnership can be lodged electronically.
• In response to the Australian Public Service Commissions ATO Capability Review (PDF 817KB)Opens in a new window, the ATO released Our Performance EvolutionOpens in a new window on 11 July 2025.
• On 12 June 2025, the ATO released a draft Vulnerability Framework for public consultation. Submissions closed on 18 July 2025.
• The ATO will focus on debts on hold and will be offsetting these debts against refund amounts. Communication will be issued to advise the market of this renewed focus.

Next 5,000 program

Timely lodgment is a key expectation for the Next 5,000 population, there is a low tolerance for non-lodgment. In the months ahead, the ATO will communicate concerns through multiple channels. Taxpayers are strongly encouraged to review their lodgment status, lodge where needed and stay up to date with their obligations.

To improve the taxpayer experience, the ATO is making refinements to case products, specifically streamlined assurance reviews (SAR) and next action reviews (NAR).

Members noted that non-lodgment may arise for some taxpayers where they are in dispute for a prior year, and they are unsure how to treat their future year returns. Members also observed that when a registered tax agent reaches the 85% on-time lodgment benchmark, there may be a level of complacency with the remaining 15% of the outstanding lodgments.

Members provided positive feedback about the changes to the SAR and NAR products. In particular, the SAR 2-month notification change and the issuance of letters by case teams will allow groups to meet with case teams earlier, obtain context for the review, and understand why the ATO is looking at certain issues. Tax governance will be tailored to errors identified in the SAR to understand tax governance processes and procedures to prevent these errors from reoccurring. NARs will be phased out and replaced with resolving issues in the current SAR or an escalation to audit where required.

Members supported the proposed reduction in detail provided in the SAR report, though one member raised concerns that some taxpayers see value in receiving a detailed analysis of what was considered during a review even where no errors were identified.

Top 500 program

The Top 500 program changes were published on ato.gov.au in April, and a webinar for representatives and advisers of Top 500 groups was held on 1 May 2025 to explain the changes. The slides from the presentation were sent to all registrants and the recording is available at Top 500 Program - Changes to the program from April 2025 - ATOtvOpens in a new window. The focus is now on implementing these changes by working with Top 500 groups.

The ATO's expansion of the Provisional justified trust for Top 500groups approach to all groups that achieve full tax assurance has been published. The approach is about encouraging more groups, particularly those in our significant category, to invest in tax governance.

The 2025 Top 500 client survey was conducted in May and June 2025 and the detailed results will be presented to the Private Groups Stewardship Group (PGSG) and published on ato.gov.au in the second half of 2025.

Members commented that guidance on how a private group is defined is not overly detailed and further clarity may be appropriate. The ATO acknowledged the feedback, noting that a close collaborative approach with the Top 500 engagement teams will also assist with resolving any ambiguities.

Community expectations of privately owned and wealthy groups and GST

The ATO is exploring how community expectations might shape its approach to GST compliance for privately owned and wealthy groups. The Tax Avoidance Taskforce is primarily focused on ensuring that the largest and wealthiest taxpayers pay the right amount of income tax in Australia. The ATO asked members if there is a segment of the privately owned and wealthy groups population that needs a differentiated approach and what such an approach might look like, noting the most significant GST reporters do not all appear to be concentrated in the Top 500 population.

Members agreed that wealth alone should not determine differentiated GST engagement and noted that:

• fraudulent GST claims and phoenixing undermine community trust
• GST was originally introduced with an implicit trade-off, businesses take on compliance obligations in exchange for cash flow benefits
• non-compliance often stems from poor cash flow management rather than deliberate evasion, the ATO could consider targeted education campaigns to help businesses understand and manage GST obligations proactively, especially in industries with longer payment cycles like construction
• BAS agents often have real-time visibility into client cash flow and GST positions they could play a stronger role in assurance and education efforts
• classification errors, for example, food items, margin schemes in property as persistent GST risks and the ATO could consider industry-specific guidance and system checks could help mitigate these errors.

Family trust distributions tax

Following the PGSG out of session consultation on 10 February 2025, the ATO has continued to consider internal and external stakeholder feedback.

The session provided updates on the ATO's consideration of:

• administrative improvements to make it easier for taxpayers to comply
• group member suggested administrative proposals for taxpayers who have family trust distributions tax (FTDT) exposure
• potential opportunities to prevent on-going FTDT compliance issues.

Members discussed the various administrative improvements that the ATO has been progressing since the consultation.

• Updates to the Online services for agents, family trust elections (FTE) and interposed entity election IEE) report are currently being progressed in response to feedback on visibility, or lack thereof, of certain elections. This information is currently available if taxpayers have previously lodged their elections and call the ATO to confirm. The ATO confirmed it will issue communications once the updates have been finalised.
• The 2025 FTE (NAT 2787Opens in a new window) and IEE (NAT 2788Opens in a new window) declaration forms have now been updated to clarify that the election declaration can be signed by a public officer or a director of the corporate trustee. The members discussed whether this was prospective, the ATO confirmed it was just a clarification therefore existing elections are valid.
• The ATO's upcoming planned communications and updates, such as web content updates, will provide further education and awareness on compliance obligations, consequences and issues that can arise.
• Members also discussed the compliance challenges and compliance issues that arise under the current legislative framework.

The group will continue to work collaboratively to explore potential opportunities to prevent on-going FTDT compliance issues.

Draft practical compliance guideline

The ATO is developing a draft practical compliance guideline (PCG) outlining its compliance approach to the reporting of significant global entity (SGE) status for entities that are members of privately owned and wealthy groups (private groups).

The purpose of the draft PCG is to support private groups in managing compliance risks when assessing whether group members are SGEs, in the context of the generally lower public financial disclosure requirements for private groups and the complexity in applying accounting principles to entities commonly found in private groups, such as discretionary trusts.

The ATO plans to release the draft PCG for public consultation later this year.

The ATO noted that country-by-country reporting entity status is outside the scope of the draft PCG. The draft PCG sets out a practical administration approach, it does not provide an interpretation of accounting standards.

The draft PCG does not apply to publicly owned and foreign controlled groups. Members suggested that the draft PCG should also apply to foreign controlled private groups which the ATO will consider.

Members questioned whether there would be an additional disclosure on ATO forms (such as the reportable tax position (RTP) schedule) regarding whether the PCG applies. The ATO is not contemplating including the PCG in the RTP schedule at this stage.

Members queried whether a change in ATO communication to taxpayers regarding their SGE status will occur as groups approach the AUD $1 billion threshold. The ATO acknowledged this comment but noted this wasn’t feasible given the time lag, that is the ATO being reliant on this data from lodgment.

The ATO welcomed member feedback on the draft PCG. Members were invited to make a submission at any time before the wider public consultation period is completed.

Technical updates

The ATO discussed the recently published public advice and guidance pieces.

Members discussed the recent part unfavourable decision of the Full Federal Court in Merchant v Commissioner of Taxation [2025] FCAFC 56, delivered on 22 April 2025. The ATO advised it has filed a special leave application with the High Court appealing part of the section 177E issue. The majority found in favour of the Commissioner for all other issues including section 177D and the application of the taxation of financial arrangements rules. The taxpayer has also filed a special leave application with respect of section 177G.

Members discussed the ATO's position in relation to the application of the 45 day holding period rule in the context of family trusts. The ATO reiterated its position that for a beneficiary of a discretionary trust with an FTE in place, both the beneficiary and trust are required to meet relevant qualified person testing and must satisfy the 45 day holding period requirement to receive the benefit of the franking credit offset. The ATO undertook to update its web guidance to further emphasise this view.

Attendees

Attendees list

Organisation	Member
ATO	Louise Clarke (Co-chair), Private Wealth
ATO	Jenny Lin, Private Wealth
ATO	Kasey Macfarlane, Private Wealth
ATO	Rowan Fox, Individuals and Intermediaries
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
EY	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
Tax Bar Association	James Strong
The Tax Institute	Jonathan Ortner (Co-chair)
William Buck	Tim Lyford
Workpac	Rachel Tyler

Guest attendees

Guest attendees list

Organisation	Attendee
ATO	Amy James-Velagic, Private Wealth
ATO	Carlee Deigan, Private Wealth
ATO	Carolynne McQuay, Private Wealth
ATO	David Kasmarik, Private Wealth
ATO	Glenn Cooper, Private Wealth
ATO	Karen Price, Private Wealth
ATO	Karen Rooke, Superannuation and Employer Obligations
ATO	Matthew Campbell, Enterprise Solutions and Technology
ATO	Paul Morgan, Enterprise Solutions and Technology
ATO	Priyasheel Jalota, Private Wealth
ATO	Pru Hancox, Private Wealth
ATO	Victor Yong, Private Wealth
ATO	Vince Lagana, Private Wealth

Apologies

Apologies list

Organisation	Member
ATO	Andrew Watson, Individuals and Intermediaries