MEDIUM AND EMERGING PRIVATE GROUPS

At Hills Tax Accountant Hobart, we do our best to keep you up to date on the latest information from the Australian Tax Office so that you don't inadvertantly get on their bad side. With this in mind, here is some important information about work that the ATO is doing right now to check that growing businesses are staying in line with expectations.

Is your small business growing? If it is, your financial and tax obligations may also be evolving.

Recently, the ATO started reached out to a selection of growing businesses, to notify them of potential inclusion in its Medium and Emerging Private Groups tax performance program. If your business is expanding and showing signs of success, here’s what you should know about this program and how it could affect your compliance and reporting obligations.

What’s the Medium and Emerging Private Groups Program?

The ATO’s Medium and Emerging Private Groups program targets private businesses and entities that meet certain criteria, including:

• Private groups linked to Australian resident individuals, along with their associates, who control wealth between $5 million and $50 million.
• Businesses with an annual turnover exceeding $10 million that are neither public nor foreign-owned and are not part of a high-wealth private group.

If your business is approaching these thresholds, it's a good time to take a proactive approach to tax compliance and assess your financial processes.

The ATO has highlighted a few key areas where businesses tend to make mistakes, and they’re worth double-checking to avoid potential issues.

Some Key Areas to Review for Smooth Sailing

The ATO has identified four key areas where errors often crop up for businesses in the Medium and Emerging category. Keeping these in mind can help ensure that your business remains compliant and penalty-free.

1. Trusts

If trusts are part of your business structure, you’ll want to review your governance practices. Certain trust activities tend to attract the ATO’s attention, so understanding what’s under the spotlight and ensuring compliance is essential.

2. Business Loans and Division 7A

Have you taken out loans within the business or set up Division 7A arrangements? Performing annual checks on these arrangements is crucial. Here’s what to look out for:

• Incorrect Accounting: Small accounting errors can have big consequences, especially when dealing with loans.
• Non-Compliant Loans: Ensure that any loans made align with Division 7A’s rules.
• Benchmark Interest Rates: Check that the interest rates on loans meet Division 7A requirements.
• Re-borrowing Practices: If re-borrowing from a private company to repay a Division 7A loan, make sure this complies with ATO regulations.

3. Capital Gains Tax (CGT) Concessions

If you’re restructuring or thinking about it, you may want to access CGT concessions. Eligibility for these concessions can change year by year, so always double-check your status before applying to avoid surprises down the line.

4. Income Reporting

Income reporting errors are common but often easily preventable. If you’ve missed reporting some income or made a mistake in your records, it’s wise to amend your return or correct the error as soon as possible.

What to Do if You’re Contacted by the ATO

Receiving a letter or email from the ATO can be intimidating, but it doesn’t need to be. If your business is contacted, the best step is to reach out to your registered tax professional. They can guide you through the process, helping you ensure that everything in your records is accurate and compliant with ATO standards.

How Hills Accounting Can Help

For any growing business, staying on top of compliance requirements is essential. Our team at Hills Tax Accountant Hobart understands the ins and outs of small business tax requirements and can help you review your practices to avoid any costly mistakes. If you’re unsure about trusts, Division 7A, CGT, or income reporting, we’re here to provide expert advice.

For more information, email us today at admin@hillsaccounting.com.au or call us on 03 62737800
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