According to the Australian Taxation Office (ATO), Australia’s Top 500 private groups control $207 billion in net assets, report around $195 billion in total income and have over 16,000 associated entities, while utilising complex group structures.
The Top 500 tax performance program, established under the Tax Avoidance Taskforce, encourages transparency and helps the ATO to determine whether these companies are correctly meeting their income tax and GST obligations.
The ATO has reported on its interim findings from the program.
Background
Who is the Tax Avoidance Taskforce?
The ATO established the Tax Avoidance Taskforce in July 2016 to focus on large public groups and multinational corporations. The taskforce has since raised $13 billion in tax liabilities.
Specific compliance programs led by the taskforce include:
- Taking action against taxpayers involved in tax avoidance or evasion using trusts, with a focus on privately owned and wealthy groups.
- The Next 5,000 tax performance program which seeks to ensure that Australia’s largest privately owned and most wealthy groups (that are not already part of the Top 500 program) are paying the right amount of tax.
Which groups are included in the Top 500 program?
The Top 500 program covers:
- Private groups with:
- Greater than $350 million turnover, regardless of net asset value.
- Greater than $500 million net assets, regardless of turnover.
- Greater than $100 million turnover and $250 million net assets.
- Market leaders or groups of specific interest.
- Private economic groups with a total business income greater than $250 million, that are included in the large company tax gap.
Top 500 program interim findings
As of June 2021, the ATO has engaged with over 400 of the top 500 private groups in Australia.
The interim findings suggest that most large private groups report correctly and meet their taxation obligations, with more than 50 groups attaining the highest transparency rating.
Assistant Commissioner Kasey Macfarlane said “However, greater transparency around the tax affairs of large private groups is always welcome as it helps the ATO assure that they are meeting their tax obligations.”
“The ATO believes that working with and engaging early on complex tax issues prior to lodgment, provides certainty to large private groups, prevents disputes, and guarantees tax revenue for Australia,” Ms Macfarlane said.
Challenges and specific areas for improvement
The Top 500 program has highlighted that:
- Large private groups tend to have lower levels of corporate governance and invest less in tax governance than public groups.
- Large private groups face less stringent regulatory reporting requirements.
- The ability of the ATO to be certain that these groups are complying with their tax obligations is complicated through opaque group structures and related party dealings that occur outside of tax consolidation.
Conclusion
The Top 500 program has allowed the ATO to engage with Australia’s largest private companies to improve transparency and to increase community confidence that they are paying the right amount of tax. While the interim findings suggest that most groups are compliant with income tax and GST obligations, areas for improvement have been identified to further improve tax transparency.
