Last week, the Australian Taxation Office (ATO) released its first estimate of the income tax gap for the high wealth population. It was estimated that in 2016-17, over 90% of the high wealth private groups’ income tax was paid voluntarily or with little intervention from the ATO.

There are approximately 5,000 high wealth private groups in Australia, comprising 9,000 individuals and 18,000 companies. In 2016–17, they contributed over $9 billion in income tax and employed around 780,000 people. High wealth private groups are defined as Australian resident individuals who, together with their associates, control wealth of more than $50 million.

The tax gap was approximately $770 million, or 7.7%. This is considered well in terms of income tax compliance compared to other groups, according to the ATO in a press release.

“The vast majority of high wealth private groups take their tax obligations seriously and are trying to do the right thing,” ATO Deputy Commissioner Tim Dyce said.

“Many of the issues we see are genuine errors and honest mistakes resulting from misunderstandings in applying the tax law or miscalculations.

“Our data shows that these groups will often voluntarily self-correct once they become aware of errors. This allows us to direct our resources towards the small number that are seeking to do the wrong thing.”

ATO research also shows that a small number of high wealth private groups are deliberately engaging in risky behaviour. This includes seeking to engage in artificial and non-commercial arrangements that are intentionally designed to avoid paying tax.

“While we continue to observe a small number that are deliberately engaging in tax avoidance, we are confident that our compliance strategies are tackling the bad behaviour we see from higher-risk taxpayers and their agents,” Mr Dyce said.

“From 1 July 2020 we will be expanding the work of the Tax Avoidance Taskforce and as part of this we are introducing a new program focusing on high wealth private groups and engaging early to help them get it right. 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.”

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