The Australian Taxation Office (ATO) is paying close attention to wealthy baby boomers, especially those who own family-run businesses. Many of these individuals are passing on their businesses and assets to their children or selling them. The ATO is concerned that some of these transfers and business restructures are being done in ways that reduce tax payments unfairly.

According to ATO Private Wealth Deputy Commissioner Louise Clarke, succession planning and tax risks are a major focus for 2025. The ATO has noticed a rise in business reorganizations that seem to be linked to business owners retiring and passing on their wealth.

If you belong to the ATO’s Top 500 (the wealthiest private groups in Australia) or Next 5,000 (those who control a net wealth of over $50 million), expect the ATO to closely examine how money moves through your businesses and investments.

Why Business Owners Should Be Careful

For many business owners, their company is more than just a source of income—it’s their biggest asset. Over the years, they’ve earned income through salaries, dividends, or by selling shares. While tax laws allow business owners to structure their assets in ways that protect their wealth, they must do so legally. If the ATO finds that a structure exists only to avoid taxes, it can deny any tax benefits under Part IVA, the rule that prevents artificial tax avoidance.

The ATO is particularly watching business owners who are nearing retirement and want to pass their companies down to their children. Often, these owners transfer wealth through trusts and other financial arrangements. While this is legal, the ATO is looking at whether these methods are being used to reduce tax payments unfairly.

Areas That Concern the ATO

Some of the key things the ATO is monitoring include:

1. Division 7A loans settlements – Some companies lend money to shareholders, and instead of repaying the loan, they remove it from the books by calling it a “distribution.” This raises tax concerns.
2. Moving Assets Without Proper Valuation – If businesses transfer assets between family members or related companies, they must properly value them. If an asset is moved just to avoid paying capital gains tax, the ATO may investigate.
3. Restructuring Family Interests – Changing how family members own or control assets may trigger tax issues.
4. Changes to Trust Deeds – The ATO is checking whether changes to trust agreements are being used to lower tax payments.
5. Delays in Tax Filings – Businesses delaying tax returns after a restructure may face scrutiny.

The Use of Trusts

Trusts are under greater scrutiny in 2025. If a trust makes a Family Trust Election (FTE) or Interposed Entity Election (IEE), it must follow strict rules about distributing income. If the trust distributes money outside the family, a 47% Family Trust Distribution Tax applies.

The ATO is also tightening rules on trust tax returns for private trusts. When a trust distributes money or assets to another trust, it must complete a Trustee Beneficiary (TB) statement, unless there is an exclusion that applies. If the TB statement is missing or late, the trustee may face a 47% Non-Disclosure Tax on the undisclosed income.

How to Avoid Risk

If you control multiple businesses or investment entities, make sure everything is structured correctly. Whether these businesses are in Australia or overseas, failing to report transactions properly could lead to penalties.

Transferring a business to the next generation might require changes to share ownership, trust structures, partnership agreements, or asset transfers. Each of these changes has tax consequences that need to be carefully managed.

Business owners should also keep detailed records of why and how they transfer assets. Proper documentation can help show that the purpose of a transaction was legitimate and not just for avoiding tax.

It’s important to plan succession and tax strategies properly. Seeking professional tax advice before making major changes could be something you might need to take into consideration. Tax laws are complex, and a professional can ensure that business owners comply with regulations while still minimizing tax burdens legally to avoid any issues in the future.

Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, membership certification of the Australian Society of Certified Practising Accountants (CPA), Australian Taxation Registered Agents, certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Angela Abejo @ Pitt Martin Tax