The Australian Taxation Office (ATO) has begun issuing notices for its compliance program focusing on the “Next 5,000” private groups in Australia (Next 5000 Program). The ATO has stated that the Next 5000 Program is part of its efforts to ensure that Australia’s high wealth private groups are paying the correct amount of tax and is anticipated to lead to a number of tax reviews, audits and disputes for private groups.

Who is the focus?

Following on from the earlier ‘Top 500 Program’ that looked at private groups with more than $500 million of net assets, the Next 5,000 Program is aimed at Australian resident individuals who, together with their associates, control wealth of more than $50 million. 

What does this mean for you?

The Next 5000 Program runs for four years. If you are a member of a high wealth private group and did not take part in the Top 500 Program, it is likely that the ATO will engage with you under this new program. 

What is the focus of the program?

Under the Next 5000 Program the ATO will apply “justified trust” methodology to obtain assurance that your high wealth private group paid the “right amount” of tax. The justified trust methodology will involve the ATO’s review and consideration of the following key areas as they apply to your circumstances:

1. Governance: review and consideration of the design of your tax governance framework to instil confidence that tax outcomes are, and will continue to be, correct.

2. Tax risks previously flagged to the market: the ATO will review high wealth private groups to determine whether any tax risks, such as those published in Practical Compliance Guidelines and Taxpayer Alerts, are present.

3. New and significant transactions: the ATO will seek an understanding of your current business activities, with a focus on significant or new transactions and their tax outcomes.

4. Accounting and tax differences: the ATO will seek an understanding of the difference between what is booked to your accounts for accounting and tax purposes. 

What can you do now?

Our experience is that reviews can soon turn in to lengthy and costly disputes where appropriate steps are not taken early. We recommend that taxpayers consider the following: 

1. Prepare: turn your mind to potential issues through a self-review of your affairs. Identify any risks and if you are concerned with any issues then it pays to consult with your tax lawyer and/or accountant as soon as practicable.

2. Understand the review: if you have received a formal notice from the ATO it is important to understand the scope. The sooner you can identify and scope the matter the sooner you can deal with the real issue(s) with the ATO. We have experience dealing with officers at the ATO to ensure this process is as efficient and transparent as possible.

3. Be careful with your responses: the ATO often frames questions with a very wide scope. It is important that responses to the ATO are carefully drafted to both help the ATO to efficiently deal with actual issues but to also protect your own position under the law. For example, the ATO may request information that is subject to legal professional privilege and by providing it to the ATO you could lose the right to the privilege.

4. Seek professional advice: we often see simple reviews turn into complex disputes because appropriate advice has not been sought early in the process. Talk to your trusted advisor or reach out to one of our team members to help in this process.

For more information on the ATO’s tax reviews, audits and disputes process we recommend you read our series of articles here.

We are here to help

At Sladen Legal we specialise in management of tax reviews, audits, and disputes with the ATO on behalf of our clients. Our team offers a wealth of experience and knowledge in substantive revenue laws, ATO policies and procedures, taxation and judicial administrative law, and tribunal and court rules.

Our team has managed numerous ATO audits with similar goals to the Next 5,000 Program. Clearly documented processes, contemporaneous evidence, and internal checks have been key to a smooth review process. As such we recommend you prepare early to manage potential reviews under the Next 5000 Program.

If you would like to undertake a self-review in preparation for the Next 5000 Program or if you have received notification by the ATO and would like to specialist advice, please contact one of our team members:

Daniel Smedley
Principal | Accredited Specialist in Tax Law
M +61 411 319 327 |  T +61 3 9611 0105
E: dsmedley@sladen.com.au

Neil Brydges
Principal Lawyer | Accredited Specialist in Tax Law
M +61 407 821 157 | T +61 3 9611 0176
E nbrydges@sladen.com.au

Rob Warnock
Principal Lawyer
M +61 419 892 115 | T +61 3 9611 0155
E: rwarnock@sladen.com.au

Rob Jeremiah
Principal l Accredited Specialist in Tax and Business Law
M +61 418 500 363  l  T +61 3 9611 0103
E rjeremiah@sladen.com.au

Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163  
E  pbroderick@sladen.com.au 

Laura Spencer
Senior Associate
M 0436 436 718 |T +61 3 9611 0110
E: lspencer@sladen.com.au

Philippa Briglia
Senior Associate
T +61 3 9611 0173
E pbriglia@sladen.com.au

Denise Tan
Senior Associate
T +61 3 9611 0160  | M +61 438 714 965
E: dtan@sladen.com.au    

Edward Hennebry
Associate
T +61 3 9611 0113
E: ehennebry@sladen.com.au