The Australian Taxation Office (ATO) has recently intensified its focus on succession planning, particularly among wealthy baby boomer Australians who own successful family-controlled businesses. The ATO is scrutinizing how these individuals structure the disposal of assets, ensuring that tax outcomes align with regulatory expectations.
If you are part of the ATO’s Top 500 or Next 5,000 programs—groups comprising Australia’s largest and wealthiest private entities—it’s essential to be aware that the ATO is closely monitoring the flow of money through the entities you control.
A significant concern for many business owners is how to benefit from a successful enterprise in a compliant manner. After years of building a substantial asset, owners often seek to derive income through salaries, dividends, or the sale of shares or assets. While tax law permits legitimate structuring of assets for reasons such as asset protection, structures primarily designed to reduce tax may attract ATO scrutiny. The general anti-avoidance rules in Part IVA are designed to counteract “blatant, artificial or contrived” tax avoidance activities.
Deputy Commissioner Louise Clarke has observed that succession planning is primarily undertaken by group heads nearing retirement. These individuals typically own groups that include family members, facilitating wealth transfer to the next generation via trusts and other means.
Key areas of concern include:
- Division 7A loans being settled: Companies may pay money to a shareholder or associate under a loan account, which is then quickly settled, often via a distribution, to remove it from the accounts.
- Assets moving around the group: The true value of an asset might not be recognized, raising questions about the purpose of the transfer if not to avoid capital gains tax or gain another benefit.
- Restructuring of family member interests
- Amendments to trust deeds.
- Citing a restructure as a reason for late lodgment.
How the ATO Is Targeting Baby Boomer Wealth in Trusts
Trusts remain a key area of concern in 2025. When a trust that has made a family trust election (FTE) or interposed entity election (IEE) distributes outside of the family group, a 47% Family Trust Distribution Tax applies.
Additionally, the ATO has tightened its approach to trust tax returns for closely held trusts to ensure that trustee beneficiary (TB) statements are completed. These are required when a trust distributes income or assets to the trustee of another trust, unless an exclusion applies. For example, a trust with an FTE or IEE doesn’t need to make a TB statement. Failure to submit a valid TB statement on time can trigger a 47% Trustee Beneficiary Non-Disclosure Tax.
Reducing Risk: What Baby Boomer Business Owners Need to Know
If you or your family control multiple entities, especially those of significant value, it’s crucial to examine the connections between them—both in Australia and overseas—to avoid unexpected issues or missed opportunities.
Transferring control of your business may involve restructuring operations, such as changes to share structures, trustees, or partnership arrangements, or transferring assets to family members through trusts or other entities. All these actions have legal and tax implications that require careful consideration.
If you have any questions regarding the above information, please do not hesitate to contact our office to speak to one of our team.
