The Australian Taxation Office (ATO) has released its Top 500 Private Groups Tax Performance Program, a key initiative under the Tax Avoidance Taskforce. This program enhances the ATO’s focus on large privately owned businesses, with the aim of strengthening compliance, enhancing transparency in tax reporting and ensuring fair tax contribution from high-wealth groups.
Who and what is in scope?
The program targets the largest private groups, including:
- Groups with over $500 million in net assets, regardless of turnover.
- Groups with over $200 million turnover and over $250 million in net assets.
- Family-owned businesses, trusts, and high-net-worth groups.
The reviews extend beyond the numbers disclosed in tax returns, placing a strong emphasis on the underlying governance and business practices of these groups.
A key consideration is ensuring that accounting results align with reported tax outcomes, so financial statements and lodged tax returns present a consistent picture. The ATO closely examines a group’s tax governance framework, looking for clear, well-documented and effective policies.
Another significant focus is the review of related party transactions, particularly in relation to transfer pricing and international dealings. The ATO is increasingly focusing on cross–border transactions involving low tax jurisdictions, potential thin capitalisation risks, and transfer pricing practices that do not align with arm’s length market standards. Businesses engaging in these types of transactions can benefit from careful planning and documentation, ensuring they can clearly the commercial rationale behind their arrangements.
In addition, the ATO is paying close attention to the use of trusts within private groups, highlighting the importance of transparent and well-structured arrangements. Key aspects include:
- Ensuring discretionary trust distributions are aligned with beneficiaries’ circumstances on lower marginal tax rates and/or non-resident.
- Circular trust arrangements that are structured with the purpose of minimising overall tax liabilities.
- The arrangements of corporate beneficiary are well documented, commercially justified, consistent with tax law and not being used to reduce tax burden.
Legal spotlight
A significant development for private groups and trust structures is the recent Full Federal Court decision in Commissioner of Taxation v Bendel [2025] FCAFC 15. This case challenges the ATO’s interpretation of Division 7A regarding unpaid present entitlements (UPEs) to corporate beneficiaries. The Court confirmed that unpaid present entitlements of private company beneficiaries are not “loans” under section 109D(3) merely because they remain outstanding. The Court clarified that a UPE creates a debtor-creditor relationship, but the obligation is to pay the entitlement, not to repay a loan.
If the Commissioner succeeds in the High Court appeal, it will validate the ATO’s long-standing interpretation of Division 7A and strengthen existing compliance expectations for private groups.
Equally, if the taxpayer wins, the treatment of UPEs could be reshaped, potentially reducing the tax burden for some private groups and requiring the ATO to revise its approach.
Given the significance of the outcome, private groups should closely follow this case, as it may directly impact on governance and tax planning strategies within the Top 500 program.
Implications for private groups
For private groups, participation in the Top 500 program represents more than a compliance exercise. It is an opportunity for businesses to establish justified trust with the ATO and proactively review their governance framework, thereby building credibility and trust with stakeholders. The process enables proactive management of complex tax matters, allowing businesses to identify and address risks before they become significant issues.
Next steps
We understand the challenges this program may present for business owners and their families. Our advisors help you navigate the review process with confidence, turning compliance into a strategic advantage.
Speak with your local Nexia advisor today to confidently meet the ATO’s expectations, strengthen governance frameworks, manage risk, and strategically position your business to achieve its true potential.
