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Risky Business: ATO Audits and Tax Governance

ATO Audits and Tax Governance

Varun Kumar

In our second edition of our Risky Business Series our advisors look at Tax Governance, not just for the big guys anymore.
What is the risk?
The Australian Taxation Office (ATO) has been undertaking its reviews of the Top 100 taxpayers in Australia which is aimed at Australia’s largest taxpayers for several years. As part of its “Justified Trust” program, the ATO seeks to gain trust in taxpayers that they are paying and reporting the correct amount of tax.

Within the ATO, there is an expectation taxpayers maintain comprehensive tax risk governance framework. Whilst initially aimed at the ‘big players’, this expectation has filtered down to their next group of taxpayers who form part of the “Next 5,000” program. This program is targeted at high wealth private groups which include individuals who together with their associates (e.g., related entities such as companies and trusts) control wealth of more than $50 million. 

How can you identify and assess the risk?
Being aware of what is required and putting in place relevant processes and framework, will certainly assist you should you be selected for an audit by the ATO.
As part of any “Next 5,000” review, the ATO are seeking information on the following in relation to an entity’s governance:
  • The tax governance framework design.
  • The processes and controls in the preparation tax returns.
  • The key roles and responsibilities related to recognising and managing tax risks.
  • Whether governance controls have been tested.
The ATO themselves have highlighted in their latest findings from the Next 5,000 program that they have noticed some positive shifts in behaviour towards having tax governance frameworks in place but still approximately 70% of taxpayers do not have any formal or documented framework in place.
The ATO’s data matching capabilities are far reaching and even if you do not form part of an audit program just yet, you may be captured in the future and having risk frameworks in place will form part of good governance. In our experience, the presence of these frameworks may help establish trust with the ATO that you are paying the correct amount of tax, but also increase the effectiveness and efficiency of the tax function within your organisation.

How can a Moore advisor help?
We have assisted various private groups in preparing tax risk management frameworks and this includes (but is not limited to):
  • A comprehensive tax risk governance framework highlighting the Group’s overall approach towards tax risk.
  • Setting up internal controls to ensure compliance obligations are being met correctly and on a timely basis.
  • Establishing reporting lines to ensure tax risks are acknowledged and documented.
  • Ensuring private groups are aware of any tax risks the ATO has flagged to the market and understanding how it may impact the group.
Contact Us to find out more about how we can help you and prepare your risk management frameworks.