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Small businesses that are quickly growing may find themselves included in the ATO's medium and emerging private groups tax performance program this year, which may affect how they manage their tax and other obligations, the ATO has said.

In a recent update, the ATO said over the next month it would contact selected businesses and entities that now meet its criteria for medium and emerging private groups.

This would include private groups linked to Australian resident individuals who, together with their associates, control wealth between $5 million and $50 million.

It also included businesses with an annual turnover of more than $10 million that are not public or foreign-owned and are not linked to a high-wealth private group.

The ATO has also flagged the four key areas it would be looking to review, including trusts, business loans, Division 7A, CGT concessions and incorrect income reporting. 

In relation to trusts, the ATO said that businesses with trusts in their business structure should revisit their governance and learn which trust activities would attract the ATO's attention.

Where businesses have Division 7A arrangements in place, the Tax Office said businesses should complete annual checks to ensure they're compliant.

"Look out for incorrect reporting, loans that don't comply with Division 7A agreements, incorrect benchmark interest rates and reborrowing from a private company to make repayments on Division 7A loans," the Tax Office said.

If businesses are restructuring and looking to access CGT concessions, the ATO said they should check their eligibility each year before they apply for those concessions.

The ATO warned businesses that haven't reported all of their income or have made a mistake to correct the mistakes or amend their return.

"If we contact your business, you can contact your registered tax professional to discuss your obligations and check that you’re not making these errors in your records," the ATO said.

The ATO's medium and emerging private groups tax performance program is designed to improve the ATO's knowledge of business operating environments and the tax risks and issues that are present or that may be emerging.

"To support our understanding, we use sophisticated data and analytics techniques. We use intelligence and insights gathered through our engagements to identify trends, priority and emerging risks specific to medium and emerging private groups," the ATO said.

"We have learned from our work across the different industries and risks over the past few years. We are well-positioned and capable to respond to existing and emerging risks and issues with effective strategies and tailored activity."

Miranda Brownlee
12 November 2024
accountantsdaily.com.au