Top 500 risks and issues
Our completed and ongoing audits and reviews of Top 500 groups reflect the complexity of group structures and transactions which can give rise to tax risks and potential non-compliance within segments of the Top 500 population. Where groups are unable to adequately substantiate their tax positions and are not transparent in engaging with us, this can result in protracted compliance action and may expose the group to significant tax liabilities, penalties and interest.
We outline some of the specific tax issues and risks observed in the Top 500 population, and areas for improvement to assist Top 500 groups and advisors in getting their affairs right, on this page.
Top 500 groups and their representatives should take note of what attracts our attention, to enhance their awareness and understanding of compliance expectations. We encourage groups, particularly those that are new to the Top 500 program, to review their affairs to determine whether these issues apply to their group and engage with us early to resolve them.
Trust taxation issues
We’ve seen instances where family trust distribution tax (FTDT) has been unintentionally triggered, leading to significant liabilities for some groups. This commonly occurs when the group controller or advisers take a 'set and forget' approach to family trust and interposed entity elections.
To reduce this risk, it’s essential to identify which entities have made elections and who the test individual is for each election. This ensures that, when making annual trust resolutions or adding new entities to the group, distributions are only directed to members of the test individual’s family group. Implementing these measures will help many Top 500 groups mitigate FTDT exposure.
Up to 31 December 2026, we will consider up to 80% remission of general interest charge (GIC) on FTDT liabilities for entities that self-review and pay before an ATO review begins. Partial remission of GIC, at a lower rate, may be considered for voluntary disclosures during a review. Groups and their advisors are strongly encouraged to come forward now to take advantage of this opportunity. Further information is available in our Business bulletin FTDT spotlight article.
We continue to observe other tax issues involving trusts, including:
- complex wealth extraction arrangements that breach integrity rules, such as the reimbursement agreements, as contained in section 100A of the Income Tax Assessment Act 1936
- distributions to ineligible beneficiaries
- omitted trust income.
Having appropriate tax governance in place to review trust deeds regularly and ensure financial records are accurate will assist groups to avoid these errors.
Private company benefits
An ongoing area of focus for Top 500 engagements is compliance with Division 7A, to ensure that benefits obtained from private companies by the controllers of private groups, and their associates, are correctly reported for tax purposes.
Approximately 13% of our engagements that considered Division 7A issues raised red flags that required escalation to a review or audit.
Issues identified included the failure to document loans, make minimum yearly repayments, and report interest income. We also observed uncommercial arrangements such as the provision of assets below market rate and payments made to discharge personal obligations. These issues resulted in the benefits provided being treated as deemed dividends for income tax purposes.
While there are some circumstances where the Commissioner’s discretion to disregard a deemed dividend is appropriate, our general view is that Top 500 groups have access to the expertise to help them prevent honest mistakes or inadvertent errors. Top 500 groups are encouraged to maintain a documented Division 7A register to track shareholder loans, repayments, and asset usage, and to seek advice when dealing with complex or material matters to help ensure compliance and manage risk in respect of Division 7A.
Capital gains tax
Top 500 groups frequently undertake transactions that trigger the application of the capital gains tax (CGT) provisions, including the disposal of assets such as real property, shares, trust units and rights.
Based on engagements finalised during the 2025 financial year, 79% of Top 500 groups attained a high level of assurance regarding their application of CGT provisions to relevant transactions. For the remaining groups, several issues were identified, including:
- not recognising CGT events when disposing of assets, restructuring, or changing residency
- incorrectly classifying income as capital rather than revenue, particularly in relation to property sales by groups in the property and construction sector
- inadequate documentation to substantiate the cost base of assets or support eligibility for the 50% discount and small business concessions.
Top 500 groups are encouraged to maintain accurate and complete records for all CGT assets, including documentation detailing the acquisition of assets, any improvements, and their disposal.
Many Top 500 groups engage with our Commercial deals program to obtain pre-lodgment certainty when they have significant asset disposals.
Succession planning
Succession planning can include preparing to sell a business or passing control or wealth to family members. For Top 500 groups undertaking succession planning, we focus on groups that incorrectly recognise the tax consequences of transactions or structuring to minimise or avoid tax. The types of issues identified include:
- failing to recognise a CGT event has occurred where they have restructured or transferred an asset. This issue can arise when groups incorrectly claim an asset is pre-CGT
- transferring wealth through loans, payments or forgiveness of debt and failing to recognise the application of Division 7A
- trusts that have made family trust elections or interposed entity elections and are distributing outside the family group.
We encourage groups to put a succession plan in place as part of your tax governance, and to ensure you have the documentation to support transactions. Seeking and obtaining advice is also critical to ensure groups avoid these issues.
For more information on our approach, refer to Succession planning tax risks.
‘Business as usual’ income and deductions
In the 2024–25 financial year, engagements that considered business-as-usual activities found that approximately 69% of Top 500 groups achieved high assurance, supporting confidence in their ongoing tax compliance.
Common issues requiring further investigation encompassed:
- omitted income (including offshore income and foreign exchange capital gains)
- timing of income recognition
- treatment of related party transactions
- claiming expenses lacking connection to assessable income
- interest deductions involving loans for private use or on non-arm’s length terms.
To mitigate these risks, Top 500 groups should strengthen internal controls and procedures to ensure accurate reporting of income, substantiation for deductions, reconciliation of accounting and tax records., and commercial terms for related-party transactions. Embedding these practices within the group’s tax governance framework and seeking timely advisor input for complex matters is recommended.
Property and construction
Approximately 30% of Top 500 groups have operations in the property and construction sector. For these groups, our focus is to ensure they correctly report their property development activities, including:
- whether the development was undertaken for a profit-making purpose or part of a business of property development. The types of issues identified include the misclassification of capital versus revenue
- the manipulation of income and expense recognition between related parties, including through the use of long-term construction contracts.
For more information, refer to Property and construction.
Other tax issues
We also continue to observe issues for Top 500 groups in respect of goods and services tax (GST), fringe benefits tax (FBT), international arrangements and not-for-profit (NFP) entities, as follows.
GST
Common GST issues included the misclassification of supplies, failure to make adjustments for a creditable purpose (specifically in relation to property development activities), and errors in the preparation of activity statements.
These issues highlight the importance of specific GST controls within a Top 500 group’s tax governance framework.
FBT
FBT compliance issues were observed for some Top 500 groups, particularly around the identification, valuation, and reporting of fringe benefits.
Top 500 groups are encouraged to maintain a documented FBT governance framework.
International
International issues, including cross-border transactions, withholding obligations, transfer pricing and related party financing (including concerns with the use of non-commercial terms to push up financing costs in the property and construction industry), are relevant to approximately 40% of Top 500 groups.
Tax issues associated with cross-border financing undertaken on non-commercial terms is a focus area for the Top 500 program in 2026.
To help mitigate compliance risk, a documented process for regularly reviewing international tax issues, as well as ensuring arm’s length arrangements between related parties should be implemented.
Groups should also be aware of new thin capitalisation and debt deduction creation rules effective from 1 July 2023 and 1 July 2024, respectively. Refer to the following guidance on our website:
- Thin capitalisation
- Understanding the debt deduction creation rules (DDCR)
- Debt deduction creation rules and Division 7A
NFPs
Approximately 25% of Top 500 groups include one or more not-for-profit (NFP) entity, such as a private ancillary fund. NFP entities enjoy tax concessions but eligibility for those concessions is subject to specific integrity rules which can operate, for example, to make an NFP ineligible for a refund of franking credits.
As with all NFPs, private ancillary funds and other not-for-profit entities that are members of a Top 500 group need to ensure they are aware of, and comply with, their obligations to qualify for tax concessions.