The Australian Taxation Office (ATO) is rolling out a program that will ramp up scrutiny on wealthy individuals and companies as it seeks to catch out tax cheats.
In 2016/17, there were approximately 5000 high-wealth private groups, with more than A$50m in net wealth. They comprised 9,000 individuals and 18,000 companies. They paid a total of A$9.3bn in income tax in the 2016/17 tax year, which is more than 90% of the amount expected by the ATO.
"The vast majority of high wealth private groups take their tax obligations seriously and are trying to do the right thing", Deputy Commissioner Tim Dyce said in a statement.
We know a small number of tax advisers intentionally do the wrong thing by placing their high wealth private groups' clients into risky and even illegal tax avoidance arrangements"
However, there was an 'income tax gap' of A$772m for the year, representing the difference between the total amount of income tax collected and the amount the ATO estimates would have been collected if every such taxpayer were fully compliant with the law.
ATO research shows a number of high wealth private groups are deliberately engaging in risky behaviour, including "seeking to engage in artificial and non-commercial arrangements that are intentionally designed to avoid paying tax".
"We know a small number of tax advisers intentionally do the wrong thing by placing their high wealth private groups' clients into risky and even illegal tax avoidance arrangements," Dyce said.
"These tax advisors and others who promote aggressive tax arrangements risk being subject to significant financial penalties and face the prospect of prosecution."
From 1 July this year, the ATO will expand the work of the Tax Avoidance Taskforce and introduce a new compliance programme focusing on high-wealth private groups.
"Those seeking to obtain an unfair advantage by avoiding their tax obligations will attract our full attention and will be the subject of strong enforcement action," Dyce said. He added it is "not a matter of if but when" they will be caught.
High-wealth private groups are defined by the ATO as resident individuals who, together with their associates, control wealth of more than $A50 million. This includes not only individuals linked to a high-wealth private group, but also companies where ownership by the head individual is 40% or more. It excludes companies with total business income greater than A$250m.
The maximum penalty for tax fraud in Australia is 10 years' imprisonment.