Navigating business growth: ATO's medium and emerging program for private groups
If your small or medium business is on a growth trajectory, you may soon hear from the ATO that you’re being included in its medium and emerging program for private groups.
This program is specifically designed to engage with businesses and private groups that are expanding rapidly or have substantial turnover, and it’s important to understand how this could impact your tax obligations and management strategies. Understanding the medium and emerging groups program The ATO’s medium and emerging program targets private groups and businesses that meet specific criteria.
You may be included if your business falls into one of the following categories:
Private groups associated with an Australian resident individual who, with their associates, controls wealth between $5 million and $50 million;
Businesses with an annual turnover exceeding $10 million, provided they are not public or foreign-owned and are not linked to a high-wealth private group.
If your business fits into one of these categories, familiarizing yourself with the program’s focus areas and how they might apply to your operations is crucial. The ATO has advised that it will be contacting businesses during November and December 2024. Key areas of focus The ATO has identified several key areas where errors frequently occur, which could potentially lead to penalties.
Here’s what you need to watch out for:
Trusts: If your business structure involves trusts, ensure you understand the governance requirements and which activities might attract ATO scrutiny.
Business loans and Division 7A: Regularly review your Division 7A arrangements to ensure compliance, paying close attention to accounting accuracy, compliance with Division 7A agreements, and correct application of benchmark interest rates.
Capital gains tax (CGT) concessions: Before restructuring or applying for CGT concessions, verify your eligibility each year to avoid errors.
Income reporting: It’s vital to report all income accurately. If you discover an omission or mistake, correct it promptly to avoid penalties. Proactive engagement The ATO’s medium and emerging groups program is not just about enforcement; it’s also designed to support businesses in meeting their tax obligations effectively.
The ATO uses analytics and data from a range of sources, including income tax returns, business activity statements (BAS) and third-party sources like banks and insurance providers, to understand the operating environments of these groups, helping identify and address potential tax risks.
Here’s how you can engage proactively:
Seek professional advice: Whether the ATO contacts you or not, consulting with your registered tax professional helps to ensure you’re meeting all obligations and addressing any areas of concern.
Stay informed: Regularly check the ATO’s website for updates and insights into evolving priorities and potential risks.
Understand your business profile: Recognise that your business may be part of a larger group with complex structures. The ATO often engages with the head of the group to understand decision-making processes and tax behaviour. Final thoughts Being part of the medium and emerging groups program can significantly impact how you manage your business’s tax affairs.
By staying informed, addressing key focus areas, and engaging transparently with the ATO, you can navigate this program successfully and ensure your business remains compliant as it grows. Remember, good tax governance and proactive management are your best allies in maintaining compliance and fostering trust with the ATO. As your business evolves, so too should your strategies for managing tax obligations, ensuring they align with both your growth objectives and regulatory requirements.