29 September 2021
The Australian Tax Office (ATO) uses data matching and sophisticated technology to improve the way they analyse data to identify potential tax risk areas. Furthermore, the ATO is busy with various compliance programs (e.g. Top 500, Next 5,000, Top 1,000 Combined Assurance Review program and Top 1,000 tax performance program) to help ensure everyone pays their fair share in taxes.
Through these actions the ATO hopes to obtain assurance and justified trust that private groups and high net wealth individuals have good tax governance processes in place and pay the right correct amount of tax.
Some of the main issues investigated by the ATO’s Tax Avoidance Taskforce in 2021 included:
- Engaging with taxpayers in large public groups and multinational corporations, wealthy individuals and private groups for various compliance activities.
- Abusive trust arrangements.
- Contrived trust arrangements structured to gain unlawful tax advantages.
The Taskforce has identified the following activities as the most aggressive tax avoidance arrangements for 2022:
- Tax advisers that run tax avoidance schemes and misuse legal professional privilege (LPP) during ATO reviews and audits to avoid ATO scrutiny of documents.
- Taxpayers who use complex trust structures and distribution flows designed to exploit the use of trusts.
- Wealthy individuals (and their private groups) adopting tax avoidance behaviour.
At the time of writing there is not a great deal of information available on how the ATO will target these specific tax avoidance schemes. We note, trusts are commonly used in business, and if used appropriately should not be on the ATO radar. We will keep you updated as more information becomes available about behaviours that attract red flags.
Please speak to your Findex adviser for more information or get in touch with the Tax Advisory team, who are currently assisting clients with the Next 5,000 review and can help with developing and enhancing your tax governance processes.