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Rich pickings for ATO as wealthy targeted

AUSTRALIAN BUSINESS REVIEW   April 2, 2019   James Kirby

The ATO has sharpened its focus on the top end of town.

The Australian Taxation Office has already made headlines in its pursuit of multinational tax avoiders, but a $1 billion crackdown on companies and high-net-worth individuals creates a direct focus on the nation’s richest individuals and their families.

The measures are expected to reap $3.60 for every dollar spent as the ATO once again convinces Treasury it can be a revenue-making machine.

Importantly, the crackdown expands the power of the ATO to scrutinise “specialist tax advisers and intermediaries that promote tax avoidance schemes and strategies”.

High-net-worth individuals will also be in the frame under a separate program to increase activities to recover “unpaid tax and superannuation liabilities”.

With the specific reference to “on-time payment of superannuation liabilities”, it is clear the government has been made aware of the litany of unpaid superannuation incidents that have been reported, especially among smaller family-owned enterprises.

Despite recent failures with high-profile ATO executives facing court and officials under fire for excessive force in chasing tax debts, the potential of the ATO to rope in the country’s biggest tax avoiders is clear from the government’s four-year billion-dollar commitment, which tops up an earlier $679 million put through in 2016.

The widening of the program is expected to bring in a total of $3.6bn. Specifically, the measure includes “trusts” in its range of inquiry.

Unit trusts and family trusts have become more common in wealth management following the removal of many favourable tax concessions that had previously been attached to superannuation.

For some of the nation’s wealthiest families the Coalition’s latest measures suggest there will be a clampdown on the use of trusts, regardless of which party wins the May election.

Labor has already announced it will tighten the tax treatment of individuals who receive money from family trusts.

Separately, business owners and tax advisers will breathe a sigh of relief with the one-year deferral of what is known as the Division 7A integrity rule. The measure, which focuses on how business owners treat the flow of company profits and dividends especially through family trusts, has emerged as a key issue for tax advisers in the area. However, the budget has moved out the start date for the Division 7A regime from July 1, 2019 to July 2020.

Not for the first time, when the government has tried to bring in tighter rules in complex areas, the blowback from the tax professions has been severe. As the budget papers on this measure suggest, “the government received valuable feedback from stakeholders which highlighted that this is a complex area of tax law and raised implementation issues that warrant further consideration”.

Although the budget measures clearly detail this crackdown on the top end of town — on both the corporate and personal fronts — the Treasurer made it clear in his budget speech that the very rich are very important to the ATO when he pointed out that the top 5 per cent of taxpayers pay one-third of all income tax collected.

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