- The Australian Taxation Office will be keeping a close eye on whether the wealthy are paying their taxes.
- The office is expanding its Tax Avoidance Taskforce with a new program designed to look at major commercial transactions in the private wealth market before they complete they are included in a tax return.
- High wealth private groups paid more than $9 billion in income tax in 2016-17.
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The Australian Taxation Office (ATO) is rolling out a new program to ensure the wealthy are paying their taxes.
From July 1 2020, the tax office will expand the role of the Tax Avoidance Taskforce by introducing a program that focuses on high-wealth private groups.
There are around 5,000 of these groups, which include 18,000 companies and 9,000 individuals. Between 2016-17, they contributed more than $9 billion in income tax and employed approximately 780,000 people.
Under the Commercial Deals Program, the tax office will look at the major commercial transactions in the private wealth market that are each worth more than $10 million, before they are included in a tax return. It aims to help taxpayers "get things right at the very beginning".
“Early engagement allows us to clarify our view of how the law applies prior to lodgement," Deputy Commissioner Tim Dyce said in a statement. This delivers clarity to business, avoids long-running and costly disputes and protects Australia’s tax revenue.”
While the ATO said more than 90% of income tax was paid voluntarily by these groups, others didn't always get it right.
Dyce said most of these groups "take their tax obligations seriously and are trying to do the right thing" and some of their tax issues stem from mistakes.
“Many of the issues we see are genuine errors and honest mistakes resulting from misunderstandings in applying the tax law or miscalculations," he said.
“Our data shows that these groups will often voluntarily self-correct once they become aware of errors. This allows us to direct our resources towards the small number that are seeking to do the wrong thing.”
And that "small number" are "deliberately engaging in risky behaviour," the tax office noted. "This includes seeking to engage in artificial and non-commercial arrangements that are intentionally designed to avoid paying tax."
The Tax Office highlighted that tax advisors who purposely lead their wealthy clients astray could face prosecution.
"We know a small number of tax advisors intentionally do the wrong thing by placing their high wealth private groups’ clients into risky and even illegal tax avoidance arrangements," Dyce said. "These tax advisors and others who promote aggressive tax arrangements risk being subject to significant financial penalties and face the prospect of prosecution.
A roughly $770 million tax gap
The ATO estimated that the tax gap of high wealth private groups in 2016-17 was 7.7% or roughly $770 million.
The tax gap measures the rough difference between the amount of income tax collected and the amount the ATO estimated would be collected if all the taxpayers made the right payments.
The ATO said it includes individuals and companies linked to a high wealth private group, that have a group net wealth of more than $50 million and more than 40%.