Privately Owned Wealth Groups not ready for the spotlight: ATO crackdown via Top 320 Program

12 December 2018

BDO hosted a discussion with Will Day, the Deputy Commissioner for Private Groups and High Wealth Individuals at Australian Taxation Office around Privately Owned and Wealthy Groups (POWGs) and the higher tax risk issues which are currently attracting the attention of the Tax Office.

BDO Tax Partner, Carlo Moretti said: “BDO has identified that POWGs are not ready for early engagement. They lack the requisite tax governance policies and documents the ATO want to see and if they have the tax governance records in place, the private group doesn’t follow and implement the policies.

“Tough love is ahead with intensive time consuming comprehensive risk reviews and audits; higher penalties and on-going engagement with the Tax Office for years.

“POWGs must accept that while early engagement may seem expensive initially, it is ‘cheaper’ than an intensive risk review or audit.

What is the Top 320 Program?

The ATO’s newly launched Top 320 program – is set to review the next 1,200 top POWGs in Australia. It’s a renewed push for early engagement and implementation of corporate governance aimed to restore community confidence and lead to prevention rather correction.

The follows the ATO’s Justified Trust program which has largely worked for large corporates and now the same theme is being introduced to the POWG taxpayers.

Why is the ATO cracking down now?

  • Increasing global mobility of some Australian assets and taxes not paid on exit;
  • Increasing wealth of Australians through booms in mining, property & construction; and
  • Community perception POWGs not paying the right amount of tax per the law and not paying tax on time.

Who are the POWGs?

  • They control significant amounts of wealth & employ >3 million people;
  • Pay ~$19bn in net GST;
  • Pay ~$48bn net income tax; and
  • Pay ~$650 million in net FBT.

What is the financial criteria for POWGs?

Financial criteria for POWG population has increased:

  • By net wealth – high-wealth individuals and their associates that control net wealth; and
  • By annual income - companies and associated subsidiaries with annual turnover greater than $10 million that are not public groups or foreign owned (formerly $2m).