“Succession planning, and the tax risks associated with it, is our number one focus in 2025. In recent years we’ve observed an increase in reorganisations that appear to be connected to succession planning.”
ATO Private Wealth Deputy Commissioner Louise Clarke

The Australian Taxation Office (ATO) thinks that wealthy babyboomer Australians, particularly those with successful family-controlled businesses, are planning and structuring to dispose of assets in a way in which the tax outcomes might not be in accord with the ATO’s expectations.

If you are within the ATO’s Top 500 (Australia’s largest and wealthiest private groups) or Next 5,000 (Australian residents who, together with their associates, control a net wealth of over $50 million) programs, expect the ATO to be paying close attention to how money flows through the entities you control. 

The ATO are also receiving more funding resources to start looking at businesses in the $10m to $50m turnover categories or net wealth of $5 million with slightly less intensive reviews.

A critical issue for many business owners is how to effectively (and compliantly) benefit from a successful business. In many cases, the owners have spent years building the business and the business has become not only a substantial asset, but a lucrative source of income either through salary and wages, dividends, or through the sale of shares or assets. Generally, under tax law, you can legitimately structure assets if there is a good reason to do so – like for asset protection, however this needs to be well documented in case of ATO scrutiny.

“We’re seeing that succession planning behaviour is primarily done by group heads who are approaching retirement. They typically own groups that family members are a part of, and wealth is transferred to the next generation to keep it within the family (via trusts and other means),” ATO Private Wealth Deputy Commissioner Louise Clarke said in a recent update.

Key areas of concern include:

• Division 7A loans being settled. That is, a company has been paying money to a shareholder or an associate under a loan account. The ‘loan’ is quickly settled, often via a distribution, to remove it from the accounts.
• Assets moving around the group (often the true value of an asset is not recognised raising the question, why the change if not to avoid capital gains tax on disposal or for some other benefit).
• Family member interests being restructured.
• Trust deeds being amended.
• Late lodgment.

Contact your Harris Black team member if you would like to discuss further.

28 February 2025

• Lodge tax return for non-taxable large and medium entities as per the latest year lodged (except individuals).
• Payment (if required) for companies and super funds is also due on this date. Payment for trusts in this category is due as per their notice of assessment.

21 March 2025

• Lodge and pay February 2025 monthly business activity statement.

31 March 2025

• Lodge tax return for companies and super funds with total income of more than $2 million in the latest year lodged (excluding large and medium taxpayers), unless the return was due earlier.
  
  

As 2024 draws to a close, many of us are navigating the year’s final challenges, from wrapping up projects to planning for the holiday season. It’s a busy time, but also an opportune moment to reflect and set the foundation for what lies ahead.

At our recent Business Leaders Forum, we explored how strategy is evolving in today’s fast-paced world. Long-term plans spanning five or more years are no longer feasible in many industries. Instead, the key to success lies in agility. It’s not about predicting every twist and turn but having a clear “light on the hill”—a vision that guides your organisation and empowers employees to make decisions aligned with that purpose.

Why does strategic decision-making often fail? We identified seven common pitfalls:

1. Lack of vision or purpose – Without a clear direction, efforts become scattered.
2. Poor situational awareness – Failing to recognise and adapt to changing circumstances.
3. Involving the wrong people – Excluding critical voices or perspectives can derail decisions.
4. Avoiding tough decisions – Delaying difficult choices only compounds challenges.
5. Unsound decision-making processes – Lack of structure leads to inconsistency and error.
6. Weak understanding of risk and strategy – Overlooking how risks interplay with strategic goals.
7. Short-term distractions – Immediate issues take precedence over essential future planning.

As we approach 2025, now is the time to ensure your organisation avoids these traps. Establishing a vision and empowering your team to make decisions with that vision in mind is the first step toward an agile strategy that thrives amidst uncertainty.

Please contact your Harris Black team member if you would like to explore this further, we can deliver vision workshops and tools to help you take the first steps towards building an agile strategy for 2025.

Here’s to a successful close to 2024 and an exciting new year ahead!

Each year, the ATO identifies key areas of focus based on the risks and issues identified through their data collection, risk detection and analysis, and case work. 

The ATO are putting more focus into Medium and emerging private groups:

• private groups linked to Australian resident individuals who, together with their associates, control wealth between $5 million and $50 million; and

• 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.

Foundational Issues

Registration, Lodgement, and Payment

• Late lodgement of tax returns, FBT returns, or activity statements.
• Failure to pay tax debts on time or engage with the ATO.

Incorrect Reporting

• Omitted income and sales for income tax and GST.
• Ineligible R&D claims and incorrect base rate entity status.

Division 7A

• Unreported shareholder loans and non-compliant loan agreements.
• Failure to meet repayment requirements or apply correct interest rates.
• Inadequate record-keeping and reborrowing arrangements.

Capital Gains Tax (CGT)

• Incorrect eligibility for small business CGT concessions and miscalculation of CGT discounts.
• Inaccurate market value substitution for related-party transactions.
• Incorrect non-resident access to concessions.

Property and Construction

• Misclassification of capital vs. revenue on property disposals.
• Failure to report sales or GST correctly.

Other Transactions

• Non-arm’s length income in SMSFs and misinterpreted family trust elections.
• Failure to include foreign trust distributions (Section 99B).
• Discrepancies in franking account balances and compliance with the 45-day holding rule.

Emerging or Evolving Risks

Incorrect Reporting

• Over-claimed deductions by trusts reducing net income.
• R&D claims ineligible for certain industry sectors.

Other Emerging Areas

• Tax losses.
• Inappropriate share buybacks.
• Thin capitalisation.
• Cryptocurrency tax issues.
• Superannuation balance exceeding the $3 million cap.

Targeted Focus Areas

Succession Planning

• Addressing risks related to the ageing demographic and succession planning.

Private Equity

• Managing risks throughout the private equity lifecycle, from pre-acquisition to exit.

GST Focus: Retail and Construction

• Reporting errors on GST supplies, acquisitions, and goods.
• Inaccurate commercial adjustments.
• Intra-group transactions.