The Australian Taxation Office (ATO) has released new guidance outlining its key areas of focus for privately owned and wealthy groups. Each financial year, the ATO highlights the issues it will be monitoring more closely. For business owners, families, and wealthy groups, this serves as an important reminder to review tax positions, ensure compliance, and identify potential planning opportunities before year-end.
There are many areas that the ATO will be focusing on this year. Please click this link for full details. We pull out three key areas as below:
I. Family Trust Distributions
The ATO is continuing to closely review family trust distributions. When a family trust makes a family trust election, it gains access to several tax benefits. However, problems arise when the trust distributes income to someone outside the “family group.”
If this happens, it can trigger Family Trust Distribution Tax (FTDT), which is charged at a hefty 47% of the amount distributed, plus interest on any unpaid amounts. What makes this even more serious is that there is no time limit for the ATO to collect unpaid FTDT.
If you operate a family trust, it’s essential to make sure your distributions stay within the defined family group. Reviewing trust deeds and resolutions each year before finalising distributions can help avoid this costly mistake.
II. Business Restructures
The ATO has also flagged its concern about business restructures designed mainly to access tax concessions that wouldn’t otherwise apply.
For example, this may include changing how a business or group is structured to take advantage of the small business CGT concessions. The ATO has previously used the general anti-avoidance rules (Part IVA) to challenge restructures that appear to be primarily tax-driven.
If you’re considering a restructure, make sure it has a commercial purpose beyond tax benefits and that all steps are properly documented.
III. Trusts and Franked Dividends
Another area attracting attention is trusts distributing franked dividends to newly created companies. The ATO believes that if a corporate beneficiary didn’t exist when the original dividend was paid, it might not qualify to use the franking credits.
This is because the company may not meet the 45-day holding period rule, even if the trust held the shares for long enough.
Stay Proactive
These ATO focus areas highlight the need for proper planning and documentation. If you operate through a family trust, hold business investments, or are considering a restructure, now is the time to review your tax position.
Our team can help you ensure your structures are compliant and that your strategies remain effective under current ATO scrutiny.
Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.
Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, membership certification of the Australian Society of Certified Practising Accountants (CPA), Australian Taxation Registered Agents, certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.
This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.
By Angela Abejo @ Pitt Martin Tax
