The Australian Taxation Office (ATO) has a tax assurance program based on the concept of ‘justified trust’. The ATO’s Justified Trust Program commenced in 2016 and is designed to collect evidence that the Australian tax obligations of high net worth individual and corporate taxpayers are being fully met.
Target market segments
There are three key market segments for the Justified Trust Program:
1) the ‘Top 500’ private groups
2) the ‘Next 5,000’
3) ‘medium and emerging’ private groups.
The Top 500
The ATO’s ‘Top 500’ includes private groups that have:
- over $350 million in annual turnover, regardless of their assets
- over $500 million in net assets, regardless of their annual turnover
- over $100 million in annual turnover and over $250 million in net assets
- business income of over $250 million, or
- market leaders in current ATO focus industries or areas.
The ATO uses data matching to identify any links between wealth individuals and business entities.
The Next 5,000
The ‘Next 5,000’ market segment of the ATO’s Justified trust Program includes any entities that are linked to Australian residents (and their associates) who control wealth of more than $50 million.
Medium and emerging private groups
Medium and emerging private groups include:
- any entities that are linked to Australian residents (and their associates) who control wealth of between $5 million and $50 million
- businesses with an annual turnover of more than $10 million.
Focus areas of the Justified Trust Program
The ATO engages directly with tax-paying individuals or entities in each of the three market segments. They focus on four key areas as part of the Justified Trust Program’s tax assurance process:
1) the taxpayer’s tax governance framework
2) potential tax risks
3) the tax outcomes of significant and/or new transactions
4) analysing why accounting results and tax obligations may vary.
The focus of the Program is on the prevention of tax issues,
rather than correction. The greater the assurance that an individual or
business entity is able to demonstrate during their dealings with the ATO under
the Justified Trust Program, the better in terms of the level of future
dealings or scrutiny that may be necessary.
How to prepare for a Justified Trust Program review
The ATO will generally request the following as part of the Justified Trust Program tax assurance process:
1) information that you have used to prepare your tax returns over the past years and that you will use for the forthcoming year.
2) information about your company’s business structure
3) your tax governance documents.
How we can help
Our experienced and award-winning team of individual and business accountants at Wilson Pateras can help you to prepare for your Justified Trust Program assurance review as well as any dealings with the ATO.
It’s important to understand that tax minimisation is a legal and sensible strategy. Tax avoidance on the other hand is not and can carry heavy ATO penalties. We can help you to assure your ongoing tax compliance.
Contact us today for a complimentary, obligation-free consultation to find out how we can help you!