Justified Trust initiative now in flight across the large market

Justified Trust initiative now in flight

James Gordon discusses the launch of the ATO's Justified Trust initiative and its implementation in two parallel workstreams - Top 100 and Top 1000.

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Director, Tax Transformation

KPMG Australia

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The Australian Taxation Office (ATO) has now launched the Justified Trust initiative in the market and is implementing it in two parallel workstreams. The first workstream is for the “Top 100” i.e. those taxpayers in a real time Key Taxpayer Engagement.

These taxpayers are subject to ongoing engagement and review through Pre-lodgement Compliance Reviews (PCRs) or Annual Compliance Arrangements (ACAs). These engagements will have a greater focus on tax performance and tax governance this year, in addition to the tax risks and significant transactions that are already a core part of these reviews.

The second workstream is being implemented across the Top 1000 below the Top 100. This is also built around Justified Trust and is known as the “Tax Performance Program”. Letters have already been released on this to the first taxpayers under review. Anecdotally, so far many (but not all) of these taxpayers, appear to be in losses. The process commences with the ATO sending a Client Experience Roadmap – a guide to assist taxpayers engaging with the ATO through a four month Streamlined Assurance Review.

Subsequent to this, taxpayers are receiving what can be an extensive Request for Information on the four aspects of Justified Trust: tax governance, book to tax differences, risks flagged to the market and significant transactions. On tax governance, this will include a review/analysis of controls and gaps against suggested better practices in the ATO’s Tax risk management and governance review guide.

The ATO’s Top 1000 Tax Performance Program is aimed at obtaining evidence to achieve greater assurance that the largest 1000 multinational and public companies are paying the right amount of income tax and identifying and addressing tax risks. The program is part of the Tax Avoidance Taskforce. This program is targeted towards large multinational and public companies, focussing on the income tax affairs of those taxpayers with revenue greater than $250 million. This represents about 1000 taxpayers. The ATO has received additional budget to achieve this and is taking on new staff to implement the program.

Over the four year period of the Tax Avoidance Taskforce, the ATO will use a tailored approach through a Streamlined Assurance Review and it will focus on a 3-4 year period (not just the current income year).

There is a KPMG team tracking developments and correspondence centrally to provide the latest insights in terms of the broader approach to the program which can assist you as and when you receive your letter to respond.

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