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R&D Tax Risk Reporting Within ATO Top 500 Program

November 13th, 2023

In November 2023, the ATO published information about the Top 500 program.

The Top 500 program is one of several programs administered as part of the Tax Avoidance Taskforce. The objective of the Taskforce is to provide the Australian Government and the community with confidence that Australia’s largest public and private groups are paying the correct amount of tax.

The Top 500 program model of engagement is designed as an invitation for Top 500 groups to be proactive in demonstrating that they are meeting and want to continue to meet their tax obligations.

The Top 500 population consists of Australia’s largest family, or closely controlled, private groups. The criteria for inclusion requires the private group to have one of the following attributes:

  • over $250 million turnover, regardless of net asset value
  • over $500 million net assets, regardless of turnover
  • over $100 million turnover and over $250 million net assets
  • be a market leader or group of specific interest.

The objective of a Top 500 assurance engagement is to determine, based on the 4 areas of justified trust, that the Top 500 group has paid and will continue to pay the correct amount of tax. The ATO has noted that at the end of the 2023 financial year:

  • 323 are engaging and making progress towards justified trust
  • 41 are engaged but unwilling to progress towards justified trust
  • 38 are not yet assessed
  • 30 are in justified trust
  • 6 are not engaged.

The ATO seek to assure that the Top 500 group does not have arrangements in place that conflict with their published views and risks flagged to market. As part of their work in the Top 500 program, the ATO seek to obtain high levels of assurance that risks noted in Public Rulings, Taxpayer Alerts and Practical Compliance Guidelines are not present (or have been appropriately mitigated) within these large entities.

In stats published in November 2023 around the categories of risks within Public Rulings, Taxpayer Alerts, and Practical Compliance Guidelines that are present across the Top 500 population. The top 500 risk categories were noted as being:

  • 27% trusts
  • 24% income or deductions
  • 13% other
  • 10% international
  • 7% research and development (R&D)
  • 6% losses
  • 5% residency
  • 4% dividends
  • 2% superannuation
  • 2% GST.
Given the complexity of the R&D Tax Incentive, and the previously reported incidence of eligibility disputes by large entities in the mining and banking sector, Swanson Reed notes that the above is probably a moderate result, and hopefully indicative of a reasonably compliant participant base.

Swanson Reed supports the work being done by the ATO and recognises it as being an important part of upholding programme compliance for the R&D Tax Incentive, and for the broader taxation system.

 

Please get in touch with our office if you would like to speak to someone about a potential claim, or check out our website for more information.

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