Are you part of the one percenters?
Is a Learjet or Gulfstream your preferred method of transport?
If so, listen up – we have some important changes to tell you about. If not, keep reading – it might only be a matter of time until they are.
Who are you?
The High Wealth individual group is made up of individuals who control net wealth of $50 million or more. The ATO places extra importance on validating the group’s wealth given ‘the importance of this group to community confidence in the tax and superannuation systems.’ It’s another way of saying the ATO wants to have the most effective surveillance and monitoring systems in place to ensure you pay your fair share of tax.
The government has recently changed the criteria of the High Wealth Individual and increased it from $30 million to $50 million so if you’re in this bracket, you can now rest easy(ier).
The ATO draw on data and other intel from government agencies or the community (tip offs) to identify high net worth individuals and their associated entities.
Once they’re in, they’re in
The ATO will engage with you to identify the individual (and their associates) who control such entities. Control, in this instance, is effective control in terms of the primary decision-making role.
They will look towards using sophisticated data matching techniques to detect relationships in private groups across all different types of entities. The ATO take this whole group approach to get as much information from not just the controlling individual, but also their connected associates and entities.
The ATO’s engagement could involve a simple overview of your group structure to ensure its all above board, a review of your lifestyle to ensure it aligns with your income or a full audit if they suspect something is not quite right.
The rest of them
Now you may not have made it into the above group yet, but there’s a good change you sit in the next category – the wealthy individuals. We don’t like to put a price on wealth, but the ATO do! Currently, they believe anyone who controls net wealth of $5 million or more is a wealthy individual.
Similar to the high wealth individuals, the ATO will look to engage with you to get to know you further and what you control, including their view on your group’s income tax profile. They can contact you at any time to better understand this, to confirm their understanding or ‘correct’ their own view on their understanding.
Mitigate
As with our High Net Worth clients we strongly recommend audit insurance for all of our clients. If there is a significant chance of ATO audit, an insurance policy provides funds to pay your tax agent and solicitor to deal with the Audit. The level of cover depends on your level of business involvement and is open to all clients (including individuals and Self Managed Super Funds). It can even apply retrospectively.
In addition to the ATO, audit insurance also covers audits completed by other government agencies. This includes, but is not limited to, audits conducted by the Office of State Revenue (land tax, stamp duty etc.), WorkCover audits or even ATO Superannuation Guarantee audits. This may be a standalone audit, or another audit following a ‘recently completed’ ATO audit. In this day and age, all government agencies are talking to each and transferring data so this cover is as important as ever.
What can we do?
First and foremost, the best course of action is to avoid the grey areas, seek appropriate advice from the outset and ensure your records are up to date and in order.
If you do find yourself under ATO scrutiny, the most important thing is to ensure your advisor is capable and experienced in dealing with the ATO efficiently and effectively. The process can be complex, and your advisor needs the expertise to deal with the ATO, to correctly to navigate your way through their review or audit.
If you’ve identified a mistake in your affairs, or subsequently discover one, the best plan for the correction is to voluntary disclosure to the ATO, this will ensure any penalties will be kept to a minimum. In addition, the ATO can provide a ruling to provide clarity around a complex transaction or arrangement or series thereof.
Contact m+h Private
Tax can complex at the best of times, so if any of the above resonates with you or you have further questions or you’re a one percenter that needs help, get in touch with m+h Private. We’re Brisbane based experts in all things taxation, so give us a call today on +61 7 3036 7174.