Compliance focus 2009-10: Community and business segments
High wealth individuals
At a glance
- High wealth individuals either have, or are in control of, wealth in excess of $50 million and often have complex tax affairs.
- Their sources of income include:
- property development
- investment
- retail business
- agriculture
- tourism
- manufacturing
- finance.
- They get expert advice and assistance from business advisors, including accountants and lawyers.
- We are actively working with 155 high wealth individuals. On average they have 36 associated entities, such as companies, trusts and partnerships
Our compliance approach
We select high wealth individuals for review based on risk assessments. They are asked to complete a questionnaire to give us a clearer picture of their entire business. This helps us tailor our interactions with them.
We analyse the group structures to identify areas that may need to be investigated. Sometimes our risk assessments do not uncover any issues we need to take further. In other cases, our risk assessment has identified aggressive tax avoidance arrangements set up to defeat the intent of the tax legislation. Arrangements designed to reduce tax are not necessarily illegal, but where there appears to be a lack of commercial substance, we will take a very close look at them. For cases where we decide the arrangements involve deliberate tax avoidance, we will make the necessary adjustments and apply shortfall penalties if appropriate.
Since 2004, more than $209 million (net) in extra tax has been paid by high wealth individuals as a result of our activities.
We issue an annual media release detailing the work undertaken over the previous year, including how much tax has been collected and any emerging trends or schemes.
Areas of focus
High wealth individuals generally meet their obligations by registering, filing and paying on time. However, the complexities of their business structures and associated entities mean accurate reporting can be an issue.
Global wealth and complex business structures
The issues of global wealth, transactions through complex business structures and many associated entities often being based overseas present many challenges. This makes the opportunities for non-compliance, accidental or deliberate, much greater. Issues identified include:
- determining the country where the high wealth individual and their entities should be taxed
- using trusts to divert or split taxable income
- inappropriate management fee payments made to loss-making associates
- businesses disposing of "investment" assets
- the purchase and ongoing associated costs of lifestyle assets, such as luxury yachts, shown as business assets
- entering into arrangements that generate tax losses
- transferring profits from one entity to another one, often to associated offshore entities
- entering schemes specifically designed to avoid tax.
What we will be doing
We will be:
- using a range of initiatives to improve the compliance behaviour of this group and our understanding of leading-edge commercial and tax planning approaches
- using environmental scans, including international intelligence, and risk assessments to identify and select high wealth individuals for review
- continuing to develop and issue specialist questionnaires to gather details of assets and all businesses which high wealth individuals and their close family members are associated with
- prioritising areas of focus, such as property developers, new immigrants, financial arrangements and avoidance, for targeted compliance initiatives, including education and investigation
- reviewing international best practice for new approaches and using, as appropriate, for example, enhanced relationships and pre-filing reviews
- working closely with other government agencies to facilitate provision of information to us.
Date published: 09 Jun 2009
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