- Joulyette Farah
ATO flags poor governance documentation as top issue in Next 5000 Program reviews
The ATO’s latest Next 5,000 group program findings have found that the Next 5,000 groups are making errors in their tax returns due to a lack of documented governance processes, procedures and poor record keeping. Effective tax governance means having clear processes and procedures in place in a governance framework to support decision making and to ensure that the group is meeting its tax and super obligations.
The groups reviewed through the Next 5,000 program comprise of around 8,000 private groups in Australia with a net wealth of over $50 million. A typical Next 5,000 group contains on average around 14 entities which can include a combination of companies, trusts and SMSFs.
The ATO has warned that poor record keeping and a lack of documented governance procedures are leading to tax issues within intra-group transactions, trust distributions and related party transactions.
Assurance reviews conducted by the ATO on these groups for the 2023 financial year found that while a high proportion of these groups had governance processes and procedures, most weren’t documented.
The ATO has observed a close correlation between a lack of documented tax governance processes with disclosure errors, late lodgement and no lodgement of accompanying schedules to the income tax return.
The ATO recommend documenting tax return procedures, including a tax return review process, which could also include a lodgement calendar to ensure income tax returns and accompanying schedules are lodged on time.
The ATO also identified issues with groups not taking enough steps to satisfy Division 7A. In the reviews, the ATO identified no written loan agreements or minimum yearly repayments and a lack of appropriate record keeping.
The ATO was unable to obtain assurance in the following areas relating to family trusts:
- Distributions made outside of the family group, and
- Inconsistency of documentation regarding individuals set out in the family trust deed and the interposed entity election forms.
You may be part of the Next 5,000 program if entities linked to you as an Australian resident individual, together with your associates, control wealth of more than $50 million.
Get in touch with us if you are interested in obtaining a copy of our Next 5000 Checklist and our complimentary Tax Governance Checklist or require assistance in documenting your governance processes or developing a tax governance framework.
Joulyette Farah
Joulyette specialises in compliance, taxation and business advisory for small to large entities and family groups. She has over 15 years’ experience as a chartered accountant in public practice, with exposure to clients across various industries.
The ATO’s latest Next 5,000 group program findings have found that the Next 5,000 groups are making errors in their tax returns due to a lack of documented governance processes, procedures and poor record keeping. Effective tax governance means having clear processes and procedures in place in a governance framework to support decision making and to ensure that the group is meeting its tax and super obligations.
The groups reviewed through the Next 5,000 program comprise of around 8,000 private groups in Australia with a net wealth of over $50 million. A typical Next 5,000 group contains on average around 14 entities which can include a combination of companies, trusts and SMSFs.
The ATO has warned that poor record keeping and a lack of documented governance procedures are leading to tax issues within intra-group transactions, trust distributions and related party transactions.
Assurance reviews conducted by the ATO on these groups for the 2023 financial year found that while a high proportion of these groups had governance processes and procedures, most weren’t documented.
The ATO has observed a close correlation between a lack of documented tax governance processes with disclosure errors, late lodgement and no lodgement of accompanying schedules to the income tax return.
The ATO recommend documenting tax return procedures, including a tax return review process, which could also include a lodgement calendar to ensure income tax returns and accompanying schedules are lodged on time.
The ATO also identified issues with groups not taking enough steps to satisfy Division 7A. In the reviews, the ATO identified no written loan agreements or minimum yearly repayments and a lack of appropriate record keeping.
The ATO was unable to obtain assurance in the following areas relating to family trusts:
- Distributions made outside of the family group, and
- Inconsistency of documentation regarding individuals set out in the family trust deed and the interposed entity election forms.
You may be part of the Next 5,000 program if entities linked to you as an Australian resident individual, together with your associates, control wealth of more than $50 million.
Get in touch with us if you are interested in obtaining a copy of our complimentary Tax Governance Checklist or require assistance in documenting your governance processes or developing a tax governance framework.
