ATO Risk AssessmentsYOUR CLIENT MAY BE AN ATO TARGET

ATO released statements about SMEs

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Where your client’s dealings are transparent the ATO can tell you what they know about your client, including the ATO view of your client’s group tax risk profile.

By sharing information about what the ATO knows, the report provides you and your client with an opportunity to self-correct and provide information.

Higher risk categorisation may warrant the ATO askingfurther questions.

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What data does the ATO use?

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1. Tax return data• Company tax return:

o Financial and other information – item 8• Trust tax return:

o Financial and other information – items 32-35o Statement of distribution – item 54

• Partnership tax return:o Financial and other information – items 32-35o Statement of distribution – item 51

What data does the ATO use?

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2. ASIC register• Company ownership

3. Land titles• Land disposal

4. Motor vehicle registry• FBT

5. AUSTRAC (Australian Transaction Reports and Analysis Centre)• International transactions• Money laundering

What is higher risk?

• The ATO’s view of risk categorisation is based on their risk differentiation framework (RDF)

• SME groups are ranked against another based on:• Likelihood of risk of non-compliance – how may

risk rules are triggered• Consequence of non-compliance – dollar

impact of identified risksSlide 6

What is higher risk?

Risk differentiation framework

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“Higher riskcategorisation maywarrant us askingfurther questions”

- ATO

When are income tax profiles used?

1. Specialised tax conversations/ engagements• Via a staged approach

o Commenced mid-April 2015 – targeted 2,100 private groups

o Continued April/June 2016 – targeted 7,500 private groups

• An information product and no action is required2. Reviews and audits

• To be transparent about why the ATO is reviewing/auditing your client

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What can you do?

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• If you receive one, your client is likely to be higher risk

• Get familiar with the “Additional Risk Information”

• Review your client records in those areas

What can you do?

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• If you find no issues or are unsure, you can:• Take no action (an “information product” only)• Contact the ATO

o The ATO call centre may be able to helpo If you have an ATO contact in the private

groups and high wealth individuals area – make contact

o Via Redchip – Trung has personal ATO contacts

What can you do?

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• If you do find possible issues, you can:• Take no further action and hope to avoid an ATO

review/audit• Make contact with your ATO contact

o Clarify the risk to ascertain if an issue actually exists and provide an explanation for their records

o Consider making a voluntary disclosure to avoid penalties and accruing punitive interest

Current SME areas attracting ATO attention

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1. Valuations• Integral to many tax transactions:

o MNAV $6M test, Value shift provisions, Consolidations tax cost setting process, Balancing adjustments, Goodwill

• The ATO have created an instruction form to support professionals when requesting valuation consultant services in an ATO dispute

• This means that either:o The ATO views any valuation you provided as not

reasonableo There was no valuation at the time of the tax transaction

Current SME areas attracting ATO attention

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2. Egregious use of trusts• The ATO recognises that trusts can be used

legitimately for asset protection, succession planning and tax planning

• However, they have set up a task force focusing compliance activities on trusts used for tax avoidance or evasion arrangements