ATO reveals top issues on its radar for Next 5,000 groups
The Tax Office has flagged the key focus areas for its Next 5,000 private groups tax performance program for the rest of the financial year.
ATO Assistant Commissioner Daniel Smith has highlighted some of the key issues the ATO will be monitoring as its prepares to release its Next 5,000 program findings report in November.
Smith said the Next 5,000 private groups tax performance program is the cornerstone of the ATO’s approach to some of Australia’s wealthiest privately owned groups.
“It defines our expectations of those groups as taxpayers, and it shows to the wider community that we’re serious about administering the system fairly.”
In a recent update, Smith noted the ATO will continue to undertake streamline assurance reviews for Next 5,000 groups with more complex structures and will undertake risk reviews on the remaining population.
“Make sure you understand what these mean for you and what you must do to prepare,” he said.
According to the assistant commissioner, the ATO’s streamline assurance reviews show that even sophisticated groups can sometimes drop the ball when it comes to recordkeeping and fit-for-purpose tax management procedures.
“Remember, getting these things right can also help you avoid serious costs,” Smith said.
The ATO gave an example of a Next 5,000 group that couldn’t demonstrate the source of funds loaned to related entities because of poor recordkeeping.
“Our review of bank statements found a significant amount of unreported funds, leading to a tax liability of more than $27 million plus additional adviser costs,” said Smith.
He noted the ATO’s annual Next 5,000 program findings report contains critical information that can assist Next 5,000 groups to understand where things can go wrong and how you can avoid these issues.
“Based on data gained from our assurance and risk reviews, it’s a blueprint for identifying and addressing the issues we’re seeing. The current report is relevant for right now and we’ll release our latest report in November.
“We’ll keep working with Next 5,000 groups and their advisers and together, in partnership, we’ll achieve our shared goal of getting your tax and super obligations right.”
The Next 5,000 program findings report released last year identified issues around poor recordkeeping and a lack of documented governance procedures.
Assurance reviews conducted by the ATO on Next 5,000 groups for the 2022–23 financial year found that while a high proportion of these groups had governance processes and procedures, most weren’t documented.
The ATO also identified issues around recordkeeping for expenditure, Division 7A compliance concerns, and issues with trust distributions.
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