ATO compliance priorities for private groups in 2025-26

The ATO has released its key risk areas for privately owned and wealthy groups in 2025–26, outlining where it will direct compliance efforts and resources. 

These priorities reflect ongoing concerns around governance, internal controls, and the application of concessions. The ATO’s data-driven approach will see increased scrutiny across several areas. 

Tax focus areas 

1. Family distribution tax  

The ATO is maintaining a strong focus on family trust distribution tax (FTDT). A family trust election (FTE) can provide access to a range of tax concessions. However, if distributions are made outside the designated family group, it will trigger FTDT, which is levied at the top marginal tax rate (currently 47%) on the distributed amount, plus potential interest. There is no time limit on the ATO's power to impose and recover an FTDT liability. They have noted a lack of awareness about the compounding nature of FTDT, which can result in significant liabilities.

2. Restructuring 

In addition, the ATO has raised concerns about restructures that are primarily tax-driven, not commercially motivated. While specific examples haven’t been provided, it’s likely the ATO will continue to focus on group restructures that appear to be driven by tax outcomes rather than genuine commercial purposes.

3. Franking credits in trust distributions 

Another priority includes arrangements where a trust receives a franked dividend and distributes it to a corporate beneficiary that was incorporated after the dividend was paid. The corporate beneficiary can’t satisfy the 45-day holding period rule to access the franking credits if it didn’t exist when the original dividend was paid, even if the trust held the shares in the company paying the dividend for more than 45 days and has an FTE in place.

Other focus areas

Reporting and compliance: timely and accurate registration, lodgment, and payment of obligations (e.g. PAYG, GST, and FBT), addressing incomplete disclosures, under-reported income or sales, fringe benefits, and incorrect claims for deductions (e.g. GST credits, fuel tax credits, or R&D incentives). 

Capital gains tax: correct application of concessions with a spotlight on restructuring designed to access concessions.

Trusts: higher-risk trust distributions, arrangements outside ordinary business or family dealings and section 100A reimbursement agreements. 

Division 7A: shareholder loans, non-complying loan agreements, and contrived arrangements seeking to circumvent Division 7A obligations. 

Lifestyle assets: the ATO is scrutinising business owners who fund personal hobbies or purchase lifestyle assets through their businesses. Characterising a private pursuit as a genuine business activity is a major compliance risk. Such arrangements often trigger a range of adverse tax outcomes, including the application of Division 7A, Fringe Benefits Tax (FBT) liabilities, and the denial of any improperly claimed deductions and GST credits. Such purchases of lifestyle assets can often result in taxpayers failing to recognise the application of Division 7A, FBT, overclaiming of GST credits and deductions that the taxpayer may not be entitled to.

Succession planning: risks arising from activities such as group restructures, asset disposals, or wealth transfers. Specifically, activities involving the movement and restructuring of assets, ownership interests and shareholder loans where the taxpayer seeks to access concessions, exemptions, rollovers, and to preserve the pre-CGT status of assets.

Industry and emerging risks

Property and construction: misclassification of property sales, particularly whether profits should be treated on capital or revenue account (profit making undertaking), or as business income. GST compliance is also a major focus, including the correct application of the margin scheme and the 'going concern' exemption. The correct application of GST including the margin scheme and going concerns, non-arm’s length dealings, and failure to lodge or report sales or income (or both) as identified by the Taxable Payments reporting system.  

Private equity: all stages of the investment lifecycle (pre-acquisition, acquisition, holding, pre-exit, and exit). 

Retail: GST reporting errors, particularly during periods of growth or when there are changes to the business structure or operating model, due to a lack of appropriate systems and controls. 

Cross border-transactions: incorrect assessment of significant global entity (SGE) status, thin capitalisation, controlled foreign company (CFC) compliance, and failure to disclose international related-party dealings. This is about ensuring profits generated from Australian activities are taxed in Australia, not shifted offshore through excessive debt or non-arm’s length related-party dealings, as well as passive income earned overseas being taxed in Australia.

Crypto-assets: under-reporting of gains and over-reporting of losses, income and expenses, capital versus revenue treatment for crypto investors and businesses. 

Tax exempt entities: inappropriate use of self-managed superfunds (SMSFs) and not-for-profits to minimise or avoid tax, including the inappropriate use of ancillary funds.

GST refund fraud: artificial invoicing between entities within the same private group to improperly obtain GST refunds involving artificial and contrived transactions. 

What does this mean for private groups?

To avoid scrutiny and and maintain compliance, private groups should: 

1. Strengthen tax governance and record-keeping  

Establish a robust governance framework with accurate documentation and effective internal controls. As groups expand, restructure, or diversify into new markets, compliance requirements will need to evolve to manage complexity and mitigate risks.

2. Meet lodgment and payment obligations 

Ensure timely registration and lodgment for all obligations (e.g. GST, FBT, and income tax). 

3. Apply tax concessions correctly

Confirm eligibility before seeking to access concessions or undertaking any restructuring to claim benefits.  

4. Manage trusts with care 

Ensure that distributions align with genuine family or business dealings. Ensure distributions are made to members of the family group as defined in the Family Trust Election, where in place. 

5. Comply with Division 7A 

Accurately report and document shareholder loans and payments. Ensure loan agreements are compliant and minimum yearly repayments are planned and made on time.

6. Succession planning 

Unintended tax consequences can arise if a group lacks a clear succession plan and appropriate documentation. Private groups should maintain documentation to support transactions and arrangements, and lodge returns on time.

7. Remain up to date with industry requirements

Stay informed about the ATO’s sector-specific priorities to ensure your group fulfils compliance obligations and can identify and mitigate risks. 

Next steps

Proper planning and preparation are essential for effective tax management. Don’t treat tax as just a cost. Begin planning early, be deliberate with your strategy, and make the most of incentives and structures available to you.

At PKF, we support clients year-round in managing their tax obligations. This includes pre-year-end tax planning, forecasting tax payments to optimise cash flow, and ensuring your business structure is fit for purpose. We can also assist you with, strategic structuring, and accessing relevant tax offsets, incentives and concessions.

If you have any questions about how these ATO priorities may affect your business, or if you'd like to review your current tax strategy, get in touch with your local PKF adviser.