ATO to target high net worths and asset-rich baby boomers
The Australian Tax Office has signaled to wealthier Australian taxpayers that they are to be subject to much closer scrutiny in the coming year, as it seeks to beat its 2013/14 revenue target of $1.1 billion of taxes raised from high net wealth individuals (HNWI).
While much of the recent commentary has focused on the profit-shifting activities of multinational companies, it isn't surprising that the ATO is also looking closer to home to collect more tax revenue.
The ATO has moved to ensure that the wealthiest Australians are paying their share of tax, focusing on how HNWI structure their personal and business assets, as well as how baby boomers pass on assets on to their children.
The ATO deputy commissioner, Michael Cranston, has said that some 300,000 HNWI have been assessed as being 'high risk' of non-compliance. Very wealthy Australians with high value assets such as private planes are likely to come under close scrutiny, with some private assets being included in tax structures as business assets.
The deputy commissioner has also highlighted the issue of baby boomers who have passed assets down to their children, in some cases recorded at an inflated price, but then sold later to avoid capital gains tax because the cost base of these assets has been inflated.
"It's really important to fully understand how your affairs are structured, to ensure they are compliant, and have audit insurance in place if you are considered to be a high net worth individual," says Bates Cosgrave Director, Matt Zhou.
"This isn't an area you where you can plead ignorance. The ATO has made it clear that it will look closely at personal and business assets, both in Australia and overseas, so if you haven't already reviewed your structures with your accountant and business advisors, it's better to be proactive about doing so than wait until the ATO knocks on your door."
As with any tax structures, HNWI should be reviewing documentation, records and making sure that they reflect their intentions as far as assets are concerned.
Even if you've reviewed your asset and tax structures in recent months, it is worth speaking to your advisors to ensure that your records and documentation would withstand an in-depth review should you be tapped on the shoulder for an ATO audit.
Contact us on 02 9957 4033 for more information.
How the ATO categorises wealthy Australians
- Private economic groups with turnover of more than $2million (150,000)
- Wealthy Australian residents who, together with their associates, control net wealth of between $5 million and $30 million (114,870); and
- High net worth individuals who control net wealth of $30 million or more (4610)
Last updated April 2015.
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.