Next 5000 – Private Tax Group – Tax Performance Program

Since 2019 the Australian Taxation Office (ATO) has expanded its tax performance program to review individuals who, with their associates and related entities, control net wealth of more than $50 million, known as Next 5000 groups.

The purpose of the Next 5000 Tax Performance Program is to give confidence to the broader Australian community that the correct amount of taxation is being paid by Australia’s wealthiest privately-owned groups.

Using data matching and analytic models to identify Australian resident individuals who qualify under the Next 5000 program, the ATO focuses on early resolution, where appropriate, correcting tax errors and improving a Next 5000 group’s existing processes to increase tax compliance.

To achieve this goal, the ATO works closely with each of the Next 5000 groups. Through comprehensive risk reviews, the ATO aims to increase ongoing and willing participation in the taxation system by these identified Australian individuals.

The ATO’s findings from their initial streamline assurance reviews show that areas of focus for the ATO are tax governance – documentation and ‘lived’ demonstration of effective oversight of tax processes, tax reporting, identification of tax risks, and timely tax compliance.

Furthermore, it is the ATO’s concern that the Next 5000 groups should seek professional tax advice where appropriate. Where the ATO has found that groups do not have documented processes and procedures, there is resultant misreporting of significant financial events, transactions, and activities.

Some of the common issues the ATO discovered during reviews include:

• Non-arms’ length arrangements between family members or related parties that are designed to reduce or avoid tax that would otherwise be payable;

• Incorrect characterisation of property sales;

• Incorrect use of tax losses and capital losses;

• Loans or payments to shareholders and their associates not complying with the requirements of Division 7A of the Income Tax Assessment Act 1936.

The ATO applies its ‘justified trust’ methodology to determine that a group has paid correct taxation based on these four principles:

To prepare for a review by the ATO, consider these four principles and how you might address each one. Ensure you have formal and adequate documentation for your tax governance and tax risk management. Work willingly with the ATO, be open and transparent to the review process to avoid the ATO taking firmer action, such as traditional reviews and audits.

Should you be affected by the latest round of Next 5000 Tax Performance Program reviews, consult with YML Chartered Accountants who can help you with your documented processes and procedures to meet your tax obligations and assure your compliance with ATO rules and regulations.

How can YML help?

Talk to our YML Chartered Accountants Team today to see how YML Group can assist you with your Next 5000 review. For more information, view our website and contact us on (02) 8383 4400 or by using our Contact Us page on our website.

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Reach out to us NOW and learn more about how we can help you by calling us on (02) 8383 4466 and requesting a callback or making an appointment with the YML Finance Team.

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Bring Forward Rule to top up your Superannuation

Receiving superannuation contributions from an employer and making personal concessional (before-tax) contributions to your superannuation fund can be just the start of building a healthy retirement sum. You can further increase your superannuation balance by making non-concessional (after-tax) contributions.

How does this work?

Since 1 July 2021 non-concessional (after-tax) contributions – up to a cap of $110,000 per year over a three-year period – may be made in to your superannuation fund.

The Australian Taxation Office (ATO) caps non-concessional contributions based on your total superannuation balance on 30 June of the previous financial year. This table shows how the Bring Forward rule is applied:

If you receive an inheritance or proceeds from a property sale, for example, these could be used to top up your superannuation balance using the Bring Forward rule. The Bring Forward rule allows you to bring forward the caps of the later year or years to make a larger contribution in one year, up to a total cap of $330,000 over three consecutive years.

This means that if you choose to contribute, say, $200,000 in the first year using the Bring Forward rule, then you would be entitled to contribute up to an additional $130,000 over the subsequent two consecutive years to reach a total cap of $330,000, based on your initial total superannuation balance – across all of your superannuation accounts, not only your Self-Managed Superannuation Fund (SMSF) – of less than $1.68 million.

When your total superannuation balance is close to $1.9 million, you may only contribute non-concessional amounts up to $1.9 million – not beyond – or use the Bring Forward rule to do so.

What to do next

If you are considering making non-concessional contributions this year, and therefore also take advantage of the Bring Forward rule, then it is strongly recommended that you track your superannuation accounts and calculate your total balance on 30 June last year. This will help you to determine whether you qualify for the Bring Forward option.

If you are considering adding to your superannuation fund for a potentially better retirement lifestyle, we at YML Group can help you by checking your eligibility to make non-concessional contributions to your SMSF. We will also help you to track any previous years’ contributions so you can use the Bring Forward rule appropriately and beneficially towards making your future all that you want it to be.

How can YML help?

Talk to our YML Super Solutions Team today to see how YML Group can assist you with the Bring Forward rule. For more information, view our website and contact us on (02) 8383 4444 or by using our Contact Us page on our website.