Purpose of this guide
As part of the Top 500 program for privately owned and wealthy groups, the ATO has developed guidance to help private groups who undertake passive investment with developing tax governance over the material tax issues they have to manage.
In particular, this guide will help with principle 2 of the 7 principles of effective tax governance – recognise tax issues and risks.
Tax governance for passive investment activity
This guide is not intended to identify every tax issue that might arise from the passive investment activities carried out by Top 500 private groups. For the purposes of this guide, the term ‘passive investment activity’ may have a different meaning to the ordinary meaning of ‘passive investment’.
The 3 classes of passive investment activity that are considered in this guide are:
This guide provides an example of what tax governance could look like for:
- groups who take a simple approach to investing in each of the 3 asset classes
- more complex approaches to managing investments in listed shares.
We recognise that this guide may have limited application to groups who have large portfolios of diversified investments and sophisticated controls in place to govern their investment activities.
The guide shows how well designed (and tailored) tax governance processes and procedures can be put into place. However, Top 500 private groups also need to ensure that those well-designed processes and procedures are carried out.
These examples are not reflective of any specific private group. Its purpose is only to highlight the tax issues that arise and level of detail that should be considered when developing effective tax governance.
The list of tax issues is not exhaustive, and the processes and procedures required by each Top 500 group may be different depending on their circumstances.