Australia: ATO crackdown – wealthy Australians on the Tax Office hit list

In his next push to combat tax avoidance and strengthen tax governance, the Commissioner of Taxation is allocating significant resources and will be giving close attention to the business activities of 'High Wealth Private Groups' (HWPG).

This week the Australian Taxation Office's (ATO) Tax Avoidance Taskforce will launch a four year review program into Australia's top 500 Australian HWPG.

Who are High Wealth Private Groups?

Australian resident private groups who, along with their associated entities, control over $500 million of net assets, or have businesses with a gross annual turnover of $350 million (irrespective of assets).

What you need to know?

HPWGs are in the cross hairs and high on the Commissioner of Taxation's hit list. Members of these groups should act now in preparation. If you are within this particular group it is not a matter of 'if' but 'when' there will be a knock on the door.

Initial request for information

Over the next four years the Commissioner of Taxation will be requesting general information from HWPGs about their intergroup dealings and general business conduct. The response to these information requests will generally be synthesised by the ATO and assigned a 'risk rating' – and 'triage' the order in which the ATO will escalate the results of the 'Risk Reviews' – to a full "Audit".

HWPGs should carefully consider their responses to the ATO as this will generally determine whether you will be subject to a more rigorous audit regime in the future. Once audit activity is undertaken, amended assessments and penalties may follow. It is uncommon for the ATO to progress through that stage without seeking to recover.

The program is intended to promote early engagement and participation with the ATO so that they can gain a better understanding of HWPGs businesses and their operations. This allows the ATO to assess the group's tax compliance and pick up on any potential tax avoidance risks early on.

The ATO will be looking for any unusual behaviour or activity which may require them to investigate further.

The Commissioner will be looking at:

  • whether the group's tax or economic performance is comparable to similar businesses
  • low transparency of tax affairs
  • large, one-off or unusual transactions, including the transfer or shifting of wealth
  • aggressive tax planning
  • tax outcomes inconsistent with the intent of the tax law
  • choosing not to comply, or regularly taking controversial interpretations of the law, without engaging with ATO
  • lifestyle not supported by after-tax income
  • accessing business assets for tax-free private use
  • poor governance and risk-management systems.

Streamlined assurance reviews

If in the initial review the Commissioner comes across unusual activity and considers that there are potential risks, the ATO will initiate a 'streamlined assurance review'.

Read More

This is a less formal approach than an audit and is aimed at encouraging participation and early disclosure. The Commissioner will assess all the information available and consider group's current corporate governance arrangements before coming to a decision on the issue.

At the end of the review, the Commissioner will either:
  • outline the events and transactions where the Commissioner agrees with the group's tax treatment and have tax assured;
  • give specific feedback based on observations made during the review (this may highlight areas for improvement and provide guidance on what you can do to mitigate risks in the future); or
  • outline any risks the Commissioner is not satisfied with and what next steps the Commissioner intend to take.

Have you caught their attention?

As part of the review program, the ATO are specifically targeting HWPGs where there is activity falling within the following categories:

  • international related party dealings:
    • thin capitalisation
    • dividend withholding and royalty withholding tax
    • transfer pricing.
  • significant tax deductions and losses
  • related party transactions:
    • Division 7A loans
    • use of private company assets
    • unpaid present entitlements from trusts to private company beneficiaries
    • payment from trusts.
  • disposal of assets:
    • capital vs revenue accounts
    • small business Capital Gains Tax (CGT) concessions
  • tax consolidations and corporate restructures
  • self-managed super fund (SMSF) dealings.

International related party dealings
If any member of the group is a foreign resident for tax purposes, the Commissioner will be looking to see if all arrangements and transactions with that entity are made at 'arm's-length' or on commercial terms.

Of particular interest will be loan agreements, royalty arrangements, distribution arrangements as well as management and other service arrangements. Transfer pricing issues are featuring highly in and dominating the international tax scene.

Thin capitalisation
Thin capitalisation is relevant for groups or entities who have a high debt to equity ratio (groups who are funded by a high level of debt and relatively little equity). The thin capitalisation rules aim to limit the amount of debt deductions claimed by entities operating in Australia who also have a foreign member in their group.

The Commissioner will be interested in the HWPG's thin capitalisation calculations and workings.

Tax deductions and tax losses
If the group has been in a revenue net loss position for several years the Commissioner will be interested in the circumstances and the HWPG's strategy in making the business profitable.

For significant net capital losses the Commissioner will also consider whether the group is entitled to offset their future capital gains under the continuity of ownership test or the same business test.

Division 7A loans
The Commissioner will be looking to see if payments made to shareholders and associates by private companies are correctly documented and have been treated correctly for tax purposes. The Commissioner would expect to see loan agreements, minimum annual repayments and interest charges and a general ledger detailing the movements in account balances of each loan.
Small business CGT concessions
If these concessions have been applied, the Commissioner would expect to see calculations and working papers that the group satisfies all the basic conditions to be able to utilise these concessions.
Tax consolidation or deconsolidation
Tax consolidation allows for a group of entities who otherwise operate on their own, to operate as a single entity for income tax purposes. If the HWPG consolidates during the year, the Commissioner would expect to see all work papers and calculations relating to consolidation entry allocable calculations and transferred losses.
Self-managed superannuation funds
The Commissioner will be interested in any of the following transactions:

  • if the SMSF received any non-cash distributions from the member or associates
  • if the SMSF lent money of provided financial assistance to a member or associate
  • income derived from or distributions received from a company or trust within the group
  • transactions entered into with a related trust such as investments, asset acquisitions or leasing arrangements.

Importance of strong tax governance

The ATO creates a tax profile for all taxpayers which is essentially a rating of the effectiveness of their tax governance arrangements.

When determining the tax profile of private groups, the ATO will take into consideration the controls and process that have been put in place for decision making and managing tax risks. In essence, the existence and effectiveness of a tax governance policy framework.

If the ATO is satisfied that the group's tax governance arrangements is effective in ensuring compliance, they will have more confidence going forward that the group is correctly managing their tax risks and will remain compliant in future.

What can be done now?

We recommend that you undertake a review and obtain legal advice (under privilege) on any historical positions which you feel might attract undue attention. We also suggest that these be reviewed independently. In the event 'voluntary disclosures' are made prior to audit – and notwithstanding the announcement of this program – taxpayers can generally access an 80 per cent penalty discount on penalties.

If you are able to have your lawyer carry out the review, any discussion or communication around the particular issue won't be subject to compulsory disclosure to the Commissioner or to the court, in any subsequent proceedings.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions