Large business and tax compliance publication
Large business and tax compliance publication
I would like to welcome you to our refreshed version of the Large business and tax compliance (LBTC) publication.
In refreshing this publication, we have consulted extensively with a cross-section of large businesses and their representatives about our mutual experiences since the previous version two years ago.
The LBTC publication seeks to provide a tangible demonstration of our commitment to transparency and accountability. I am pleased to see the mutual expectations outlined in the LBTC publication are already being used to guide a consistent and professional relationship. I see transparency as key to early engagement, to allow the ATO to provide certainty quickly as part of our shift to cooperative compliance, and to build ongoing trust and confidence.
Working together in an open and transparent way means that we can provide large business with high levels of practical certainty in a competitive global business environment. We can also provide assurance to the Australian community that we are administering the tax and superannuation systems effectively.
Our risk-differentiation framework (RDF) continues to influence our relationship with you and how we engage with you. It has been refined and enhanced since the last LBTC publication and shapes the level and intensity of our interactions with you. It informs you of our view of your relative risk, enabling you to choose how you want to engage with us.
In many respects the implementation of the RDF has been a game changer, allowing businesses to work more cooperatively with us and vice versa. We are now extending the framework to small-to-medium enterprises and tax practitioners. This approach will provide a whole-of-ATO view across taxes for these markets.
Looking forward, the ATO remains committed to administering the tax system in real time and exploring ways to provide practical certainty. The introduction of the reportable tax position schedule and pre-lodgment compliance reviews are part of this approach.
The reportable tax position schedule facilitates real-time engagement with large business on their most contestable and material tax positions. Introducing the schedule supports our efforts in providing faster and comprehensive clarification of the tax law and enables us to review the activities of the largest businesses in a timely manner.
Pre-lodgment compliance reviews assist in identifying and assessing tax risks before lodgment and provide us with a high-level understanding of your business operations and key transactions.
Both our reportable tax positions and pre-lodgment compliance reviews emphasise the importance we place on the early identification and resolution of issues and support our shift from post-lodgment compliance activities to a real-time engagement model.
This publication reaffirms our commitment to encourage, support and protect willing participation in Australia's tax and superannuation systems. Together, we can continue to build relationships that make Australia a great place to do business.
Commissioner of Taxation
The refresh of the Large business and tax compliance publication demonstrates our commitment to having a transparent relationship with the large market. In this latest edition we have updated information about the way we approach and manage compliance risks for large businesses.
We consulted internally and with taxpayers and their advisers on the publication to ensure it represents the current environment and remains useful for us and for taxpayers.
This publication takes an end-to-end look at the way we want to work with you and your advisers to help you identify and manage compliance risks. In it, we set out what we expect of you, what you can expect from us and the way we believe we should work together.
We explain how we assess risk and what you should do to ensure you have appropriate governance mechanisms in place to help you manage tax risks. We provide detailed information about our real-time approaches which are used to identify and assess potential areas of concern and tax risk.
Our processes are outlined so you can know what to expect during compliance activities if we decide to review or audit your business. We have included additional information about how we undertake our pre-lodgment compliance reviews, which are designed to identify and assess tax risks earlier and more effectively. We also explain your options should you have a concern or if you are seeking to resolve a dispute with us.
I encourage you to read this publication and use it as a guide and reference tool. I am confident you will continue to find it a valuable resource for managing your tax processes. It will assist you in being proactive in managing your tax and super compliance risks so that you can have greater certainty and an open and transparent working relationship with us.
Second Commissioner Compliance
Large business is important to the Australian economy and to our whole tax system. Our aim is to work with you to improve how the tax system works for your business. Developing a better understanding of each other is an essential first step.
Large business plays a crucial role in the revenue system by paying and withholding taxes and contributing to and managing superannuation on their employees' behalf. You also act as intermediaries in managing tax related transactions between us and other taxpayers by providing financial facilities used by others.
To support your important role in the tax system, we work to ensure our services are focused on making it easier to comply with tax laws, helping to reduce your compliance costs and supporting voluntary compliance. This approach seeks to ensure that the right amount of tax is paid in Australia.
We are committed to building relationships with you through consultation and developing mutual expectations.
The importance of large business and its overall contribution means it plays a significant role in the tax system. Collaboration allows us to ensure that the tax system operates as efficiently as possible.
Figure 1 Supporting voluntary compliance in the large business market
There are 1,850 economic groups and entities in the large market, encompassing over 32,000 businesses. The types of entities include mainly companies, but also government departments, partnerships, trusts, non-profit organisations and superannuation funds. Of the 1,850 economic groups approximately two-thirds (1,300) are public companies, of which 1,100 have an annual turnover greater than $250 million. The remainder are businesses that due to their unique characteristics are managed within the large market.
Large market taxpayers are registered for a range of tax obligations, including GST, fringe benefits tax (FBT), income tax, fuel tax credits, luxury car tax and wine equalisation tax (WET), and may also be licensed for excise purposes.
In the 2010-11 financial year, total tax receipts collected from large business were:
- 43% of total net income tax, comprising
- 63% ($35.1 billion) of company tax
- 100% ($0.8 billion) of petroleum resource rent tax
- 43% ($1.4 billion) of FBT
- 82% ($5.3 billion) of super fund income tax
- 33% ($43.9 billion) of pay as you go withholding tax on behalf of individuals
- 46% ($21.3 billion) of total net GST
- 98% ($25.3 billion) of excise tax.
At the same time, the large market encompasses:
- 80 large super funds that report a total of 19,000,000 member accounts
- more than $200 billion in international related party dealings, accounting for 36% of Australia's trade.
In monitoring compliance for income tax (figure 1), 100% of large corporate groups are scanned using a variety of risk filters to detect financial patterns that may indicate potential non-compliant positions, for example, abnormally low tax payments compared to industry peers or high-risk transactions or arrangements that have not been disclosed.
Additionally, about 30% of the large population are formally risk reviewed each year, focusing on those considered to present higher relative risk, taking into account likelihood of non-compliance and the potential consequences.
About 18% of those reviewed are then audited, and approximately 70% of those audited have adjustments. About 30% or so of those adjustments are disputed, and about 30% of those disputes will be settled, under strict guidelines.
Of the relatively few cases that continue through to the court system, between 30% to 50% will be found to have been ultimately compliant by the courts. Our view is confirmed in 50-70% of cases taken to the court, providing certainty to the market.
In monitoring compliance for GST and excise, we constantly monitor activity statements and other information relating to GST and excise to identify potential risks and issues. Each year, we contact about 10% of large businesses and undertake a risk review relating to GST or excise. About 9% of these reviews proceed to an audit, with 21% of these cases requiring an adjustment.
The majority of large businesses are compliant, however we still have concerns about opportunistic tax planning in a relatively small group of large businesses and we will have an intense focus on these businesses.
In 2011-12, for the first time we informed most large business in a single letter about our view of their relative risk of non-compliance for GST, income tax and excise. Figure 2 shows the risk categorisations for large businesses with GST, income tax and excise obligations. For these large businesses:
- 13 were categorised as higher risk and were advised that they could expect fairly intense and constant interactions with us regarding their tax affairs
- about 130 were regarded as key taxpayers and were told that we would work closely with them to monitor their tax liabilities and provide certainty
- about 400 medium risk taxpayers were told that our preliminary risk assessment had identified that there were one or more areas of tax risk where we may need to make further enquires about their tax affairs
- about 680 were lower risk and told we had no further queries and that their income tax return and/or GST affairs and excise returns for 2010-11 were now finalised.
Figure 2 Risk categorisation by tax
Our relationship with large business is ongoing and we need to work cooperatively to make the administration of the tax laws work well. We work together by engaging in open and frank dialogue on material tax issues. This allows us to:
- have a common understanding of your business to facilitate the identification and evaluation of tax risks
- ensure documents are readily accessible, whether stored as a physical document or electronically
- discuss the basis of any claim you make for legal professional privilege, accountants' concession or corporate board documents on tax compliance risk
- escalate concerns.
Our aim is to assist you and encourage you to have adequate tax governance and tax risk management controls in place for transactions in Australia and internationally.
We expect you to:
- pay the right amount of tax in the correct jurisdiction
- lodge and pay on time
- provide your staff with adequate taxation training and resourcing
- regularly report to your board.
There are many roles within a large business that are pivotal in managing tax responsibilities, including the public officer, tax manager, chief financial officer and the board. Depending on the structure of your business, your tax function will be managed in a number of different ways.
People with these responsibilities set the business' compliance, operational and financial approaches to tax. As demonstrated in figure 3, an awareness of new and emerging risks and the implications for businesses will improve the management of tax implications of major transactions as they occur.
We encourage those responsible for tax functions to ensure that sound organisational governance is in place to manage tax risks. We also encourage you to develop and maintain an open and cooperative relationship with us.
Figure 3 Tax Operating Model
Board members play a crucial role in ensuring that strong corporate governance structures are established and maintained. We encourage board members to check that their business has a sound framework in place to manage tax risks and comply with tax obligations - see How we manage tax risk. Such governance and process obligations include:
- demonstrating an understanding of your risk categorisation
- ensuring a well resourced in-house tax governance capability exists to mitigate tax risk and provide a capacity to regularly audit tax governance systems
- having in place appropriate review and sign-off procedures for material transactions and reporting requirements, which ensure that significant tax risks are elevated to the board
- having systems to identify, assess, monitor and approve material tax issues.
We are responsible for the care of Australia's tax and superannuation systems and the Australian business register.
In undertaking these responsibilities, we seek to achieve confidence in the administration of these systems.
As part of our approach to encourage willing participation in these systems, we seek to create an environment that is conducive to high levels of voluntary compliance.
You can expect us to:
- help you understand your rights and obligations
- make it as easy as possible for you to comply
- offer help in a variety of ways, including online services, publications and by phone
- deal with risks as they emerge or magnify
- administer the tax law at the minimum cost to you and other stakeholders.
We are open and accountable in our administration of the tax system and are subject to review by external scrutineers including:
- Parliamentary committees
- the Inspector-General of Taxation
- the Commonwealth Ombudsman
- the Australian National Audit Office.
We work closely with Treasury in developing new tax policy and legislation. We may refer matters to Treasury if the tax law is not consistent with policy, or produces unintended consequences or significant compliance costs.
If appropriate we will collate and forward the concerns of large business to Treasury. However, we are not generally in a position to disclose these referrals to you because it is government policy that all interactions between the ATO and government are confidential.
In addition, the Board of Taxation:
- advises the Treasurer on improving the general integrity and functioning of the tax system
- commissions research and other studies on tax matters approved or referred to it by the Treasurer.
We encourage you to contribute to enquiries by our external reviewers as you consider appropriate.
Our tax system is based on self assessment and voluntary compliance. We aim to have an open and cooperative relationship to support and facilitate you meeting your tax obligations.
Our approach to working with large business is guided by the principles in the Taxpayers' Charter and the compliance model. We differentiate our approach and level of engagement with you according to our assessment of your risk categorisation, as outlined in How we manage tax risk.
Our approach involves consulting, collaborating and co-designing with you to support voluntary compliance, manage tax risk and minimise compliance costs. We do this based on our understanding of tax law, the global tax environment, causes of non-compliance, your business environment and from a whole of tax system perspective.
We work closely with large business, reflecting your importance in the effective operation of the tax system, and wherever possible provide certainty of tax outcomes for large complex transactions as they occur. We aim to help you manage your affairs by promoting open dialogue, strong corporate governance and a focus on how you can identify and manage tax risks.
We work with you by:
- providing information to help identify and manage tax obligations
- developing administrative processes for new laws
- addressing your concerns about administrative matters or bringing them to the attention of Treasury
- providing forums, such as the Large Business Advisory Group and the National Tax Liaison Group to raise issues and explore the administration and operation of the tax system.
To support an environment of self assessment we provide a range of products, advice and assurance services. This helps to reduce your compliance costs.
We also work with foreign tax administrations and with our Joint International Tax Shelter Information Centre partners on international tax risks as they emerge, to support effective risk management around the world.
The Taxpayers' Charter guides our interactions with all taxpayers. It sets out the way we conduct ourselves when dealing with you. It helps you understand your rights, your obligations and what you can do if you are not satisfied with our service or actions.
In keeping with the Taxpayers' Charter principles you can expect that we will:
- act in a professional, courteous and respectful manner and demonstrate integrity, fairness and impartiality in the conduct of our duties
- maintain open and frank dialogue, including informing you regularly of the progress of any compliance activity
- aim to make information requests clear and unambiguous
- complete a case in the shortest time practicable, with minimum inconvenience and disruption
- communicate in a timely manner
- advise you of delays or where timelines were extended and the reasons why
- notify you if an error is detected that has resulted in you paying more than the correct amount of tax
- recognise your right to have advisers present during discussions and meetings and allow you to confer with them as necessary
- recognise your right to claim legal professional privilege, the accountants' concession, or that documents are corporate board documents on tax compliance risk.
In turn, we expect that you will work with us cooperatively and communicate with us in a timely and open manner.
Our compliance model
Our broad approach to compliance is captured in our compliance model. The model provides the framework we use to assess taxpayers and develop an appropriate response according to the nature and level of risk we identify, the causes of non-compliance and your level of cooperation with us.
Figure 4 Compliance model
Our annual compliance program outlines how we encourage high levels of compliance with Australia's tax and super laws and details key areas of risk to compliance. It is our way of being transparent with the community about what risks we are seeing and what we will focus our resources on for the coming year. The program outlines specific issues that will receive increased focus. We aim to encourage voluntary compliance, identify areas of the law that need clarification or are high risk, and address non-compliance.
In considering which large businesses may need to be reviewed and the frequency and intensity of the review, we assess the relative likelihood of you not meeting your tax obligations and the consequences of potential non-compliance. All large businesses are grouped into one of four broad risk categories each of which, from our perspective, has a suggested compliance approach for us to take - see How we manage tax risk.
How we seek to understand your business
We recognise that to establish a foundation for achieving cooperative compliance in the large market, we need a well-developed and thorough understanding of the world in which you operate and the realities of the commercial environment.
We recognise that large business operates in a dynamic social, political and economic environment. Understanding these factors, as well as the policy, legislative and administrative processes of the law, enables us to make more informed judgments on large business behaviour and its possible impact on compliance.
We use the 'business, industry, sociological, economic and psychological' (BISEP) model to help us consider business behaviour. These broad areas reflect the fact that your compliance decisions are affected by a wide set of related factors - see figure 5.
Additionally in our risk profiling, which we undertake twice a year, we consider a number of other factors including your effective tax rates, your major transactions and other interactions with us, which we derive from a range of public and tax return data. We also undertake research to better understand issues possibly impacting on your compliance, see How we manage tax risk.
- Financial or tax performance that varies substantially from industry patterns
- Significant variations in the amounts or patterns of tax payments compared to past performance, relevant economic indicators and industry trends
- Unexplained variation between economic performance, productivity and tax performance
- Unexplained losses, low effective tax rates, and cases where a business or entity consistently pays relatively little or no tax
- History of aggressive tax planning by the corporation, group, board members, key executives or advisers
- Perceived weaknesses in the compliance structures, processes and approaches
- Tax outcomes that are inconsistent with the policy intent of the tax law
- Promotion of tax exploitation schemes
- Implementation of a transaction in a way that is materially different to that described in a product ruling relevant to the transaction
- Businesses experiencing rapid growth, restructure, mergers or de-mergers, deploying new accounting software or undergoing changes of accounting staff.
Figure 5 BISEP model
If you are concerned about how a compliance activity is proceeding, we encourage you to discuss the issues with your nominated ATO case officer.
If discussion with the case officer does not resolve the issue, we encourage you to refer the issue to the senior officer whose name you will have been given at the start of the compliance activity. The senior officer will review the issue, including the relevance and scope of any information requests, and will discuss it with you and your case officer.
The senior officer will work with you and your case officer on a process for addressing your concerns.
Good tax governance
Managing your tax risk well is core to good corporate governance, particularly if you are operating in international markets. We work with you to build an environment that fosters good corporate governance and supports your tax risk management.
We are committed to engaging with you and the agencies that develop corporate governance codes to assist you to incorporate tax compliance into your risk management processes, both strategically and operationally.
We are committed to developing a better relationship with you in the interests of an efficient, internationally competitive tax system. In Australia, corporate reporting and disclosure laws make it important for boards to be appropriately informed about material tax risks.
By being transparent, accountable and engaging constructively with us, you demonstrate good corporate citizenship and lower your tax risk profile, with the benefits to reputation that follow. Our experience with corporate governance and relationship based products - such as our annual compliance arrangements - shows that better relationships with large business lead to fewer audit interventions and improved certainty for both of us.
At an international level, open and transparent relationships are increasingly being seen as key to promoting better governance practices that enhance relationships and are of mutual benefit to both the authority and large business. The Organisation for Economic Cooperation and Development (OECD) Multinational Enterprises Guidelines recognise tax risk management as a key component of good corporate governance.
Because of the additional tax compliance implications of international transactions and arrangements, businesses operating in Australia with international dealings must be aware of and meet Australian corporate governance requirements, especially record keeping obligations.
We expect to see appropriate corporate governance arrangements for your tax responsibilities.
Key people within your business should ensure that governance arrangements are being met by having appropriate oversight, sound systems, clear accountabilities, strong controls, ethical behaviours and highly skilled people supported by robust processes and procedures. Your business should have the capacity to identify, assess and mitigate tax risks.
A robust approach to tax risk management will function on two levels:
- how you manage your tax risk on a strategic level
- what controls you have in place to meet your operational obligations.
Managing tax risk can be considered in terms of what relationship you want to have with us. Your approach to tax risk will determine the nature of your interactions with us and whether we:
- work with you on a prospective, cooperative basis to identify tax risks and agree on mitigation strategies
- proceed via the use of risk reviews and audits.
We expect you to have robust board and corporate decision-making processes for major transactions and corporate strategies that incorporate appropriate coverage of tax matters.
We expect that taxpayers with strong corporate governance and tax risk management have board members who are properly supported by underlying processes that inform decision-making and play a crucial role in establishing and maintaining strong corporate governance structures. Board members should be informed of and consider material tax issues associated with proposed major transactions, arrangements and strategies and understand the effects on their business.
The board should determine what aspects of tax risk are within its control and what level of risk is acceptable, while pursuing the objectives of having:
- controlled and transparent management of tax activities on a day-to-day basis
- decision-making that is able to be understood by non-tax personnel
- an enhanced ability to anticipate issues (such as changes in law and relevant court decisions).
Effective accounting and control mechanisms help you to meet your day-to-day compliance and reporting obligations reducing your on-going compliance costs.
We expect you to have robust and transparent tax management systems and controls.
Record keeping is part of robust corporate governance. Under tax law, you must keep records to support your liabilities and claims. These records include documents evidencing an intention, election, choice, estimate, determination or calculation. Documents include both paper and electronic communications including emails.
For multinational companies or those operating cross-jurisdictionally, you are obliged to follow the requirements set out by Australian tax law.
We provide a number of services to help you accurately assess and manage tax risks, including:
- annual compliance arrangements (ACAs), which help you achieve practical certainty and reduce compliance costs
- advance pricing arrangements (APAs), which like ACAs provide practical certainty and reduced compliance costs for international dealings
- the annual compliance program, which outlines the tax risks attracting our attention
- our rulings program, where you can seek our view on a transaction, issue or product
- the GST governance and risk management guide
- assurance based risk and governance workshops.
At the strategic level, your tax risk management frameworks and governance processes should ensure:
- you have a documented tax risk management policy that is adhered to by all stakeholders
- you are aware of your risk-differentiation framework (RDF) categorisation, and the relevant matters we considered in establishing your categorisation
- you understand the consequences of your risk categorisation
- your business is aware of and, where appropriate, effectively uses the services and compliance products we offer to reduce your tax risk and compliance costs
- your process for implementing your tax risk framework is appropriately presented to your board
- you understand the risk stance of your tax adviser and are comfortable that it aligns with your business
- you are satisfied with the way your business manages any major disagreements with us
- any potential tax liabilities are adequately provided for
- the amounts of tax you are paying are in line with your business results
- if your business results do not align with your tax payments, that there is a reasonable explanation
- you do not have any transactions or arrangements that may be viewed as not making commercial sense or be perceived as seeking a tax benefit
- if your business is consistently reporting losses, that these are real economic losses and can be satisfactorily explained in terms of overall performance.
At an operational level, your tax risk management frameworks and governance processes should ensure:
- the roles and responsibilities associated with overall tax compliance are clearly defined
- your tax function has adequate resources to manage tax risks effectively and provide reasonable assistance when dealing with us
- you obtain appropriate assurances that personal tax obligations are up-to-date for individuals in key tax management roles
- the tax information used for your internal accounting and provided to us is accurate and reliable
- you are confident that your records and control systems enable you to properly assess and meet your tax obligations
- changes relating to tax and super laws or their interpretation (for example, due to court decisions) are appropriately implemented
- processes are in place to identify, assess and escalate relevant matters
- tax risks are monitored within your business, and the board and senior management are regularly updated
- your information systems provide ready access to important information and that there are no gaps in corporate memory
- your reporting deadlines are met.
We are committed to the continuous improvement of our service and relationship with you. We provide a number of ways for you to obtain information and communicate and transact with us.
At a strategic level we facilitate:
- the Large Business Advisory Group (LBAG)
- input to the National Tax Liaison Group (NTLG)
- industry-specific forums
- liaison with industry associations.
At an operational level we provide:
- general services, such as information on our website
- client services, giving information directly to you through our phone service, email subscriptions and the Business Portal
- specialised services, tailored to the circumstances of key clients in large business.
We regularly consult with large business key industry bodies and professional associations to improve our understanding of specific business environments and your perspectives on key tax issues.
These forums focus on partnering and co-designing compliance practices and approaches. This enables us to help you comply with a changing legislative environment and guides our approaches to reduce compliance costs and improve the administration of the tax system.
Large Business Advisory Group
LBAG is our peak body for consultation at a strategic level with the large business sector. Representatives from large business meet with us four times a year to discuss issues on the management and administration of the tax system from a whole of system perspective.
National Tax Liaison Group
The NTLG is the peak consultative forum created to focus on topics of strategic importance to the administration of the tax and superannuation systems.
The role of the NTLG is to raise and address:
- concerns about aspects of the administration of the tax and superannuation systems which are not functioning properly
- technical issues associated with policy implementation and application
- issues escalated from NTLG sub-forums who concentrate on their particular specialist subject area.
Membership is made up of senior ATO executive officers, professional associations and a representative from Treasury.
The group's focus is to identify and prioritise significant issues, including referring matters to Treasury where necessary.
We want to provide you with the best possible service and relationship management. To do this we work closely with you, your tax advisers and industry groups to improve tax administration.
When we need to talk to you we will contact your public officer or another authorised contact.
Our information services aim to give you timely information and advice to help you understand your rights, entitlements and obligations and give you greater clarity on the application of the tax law and on our strategies and approaches.
We keep you informed through the services listed below.
On our Businesses homepage you will find a range of up-to-date information on new law, announced changes to the law and administrative changes. You can also access our legal database.
For more information, refer to our Businesses homepage.
International tax essentials for businesses
This homepage offers detailed information on international tax issues affecting large business. You will find details of new measures impacting your business such as the review of international tax agreements, transfer pricing and tax treatment of foreign income.
Our annual compliance program outlines how we encourage compliance with Australia's tax and super laws and details our areas of particular focus across all taxpayer markets.
To build and maintain strong relationships with large businesses we offer a range of services to help you understand and manage your tax rights and obligations.
Large business phone service
You can use this service for quick and easy access to officers experienced in dealing with large business account inquiries about debt and lodgment obligations. This covers both income tax and GST.
Phone us on 1300 728 060 or fax your query to 1300 724 793.
International callers can contact us by phoning +61 2 6216 1111 between the hours of 8.00am to 5.00pm (Australian Eastern Standard Time or daylight-saving time) and asking for your call to be transferred to the appropriate area within the ATO.
Alternatively, you can fax us on +61 2 6216 2830. Other phone numbers may not work from some countries.
Large business bulletin
The bulletin is a subscription-based quarterly online publication aimed at large business and contains up-to-date information on income tax, GST, excise and super matters with links to recent rulings, speeches and media releases.
Large business alert service
The alert is a subscription-based email service for communicating directly with you when important issues arise.
The portal is a secure website for managing your business tax affairs, protected by the AUSkey pass system. You can use this to:
- prepare, lodge and revise activity statements
- view and arrange transfers to or refunds from income tax, excise, fringe benefits and some super accounts
- communicate with us using a variety of forms or via the portal mail function
- update contact and some registration details (for example, financial institution details, business and postal addresses and ATO contact details)
- lodge objections
- apply for private binding rulings.
Our compliance teams have responsibilities that include monitoring and reviewing economic and tax performance, lodgments, media alerts and significant events. During compliance activities - such as risk reviews or audits - we will give you contact information for your compliance team.
We recognise the importance of the largest businesses in Australia. Given the size and nature of your business we have a range of specialised services tailored to the particular circumstances of key clients. Listed below are some examples of these services.
Key client arrangements
We offer the key client manager (KCM) program to the largest businesses to help provide a more streamlined service and create a two-way communication channel. For these businesses your KCM is your primary point of contact with us.
Large businesses that do not currently have a KCM can get assistance by emailing the LB&I KCM Mailbox for online, transactional or administrative issues and information on your risk categorisation.
Client relationship managers
We also offer client relationship managers (CRM) to large businesses that have a significant GST or excise turnover. All large business taxpayers are allocated a CRM to assist with your business needs relating to those taxes.
Relationship management meetings
We have a program of regular visits with our largest businesses. Senior tax officers will meet with you to discuss significant events that may have tax implications, revenue performance, risk, technical and service issues and the progress and conduct of any compliance activity.
Senior executive relationship managers
We have expanded the lead relationship manager service previously offered to selected large businesses. Senior executive relationship managers are offered as a contact point for over 100 key taxpayers categorised under our risk-differentiation framework. These officers work collaboratively with the large business to facilitate, coordinate and prioritise high level engagement across the ATO, resolve blockages and issues where other avenues have failed, and arrange access to decision makers for significant issues.
We encourage your feedback at any stage throughout our interactions. Talking to us early will help resolve issues and, if issues need to be escalated, you will have access to our decision makers.
You have the Commissioner's guarantee that you can provide open and honest feedback, or raise concerns without it influencing our view or future interactions with us.
If you are not satisfied, you can phone our complaints line on 1800 199 010. Alternatively, tax practitioners can phone 13 72 86 Fast Key Code 3 2 1.
We send out a short questionnaire following the completion of a risk review, audit, private ruling, public ruling or objection, and analyse the responses to help us improve our processes.
Biannually we survey all large businesses on the professionalism of our officers. With your help we can measure our performance and focus on areas needing improvement.
We offer a range of advice services to help reduce uncertainty and clarify ambiguity about how the tax law works.
If law is clear
We have a duty to apply the law. If the law is clear but gives rise to unintended consequences, anomalies, or significant compliance costs inconsistent with the policy intent, we have a responsibility to advise the government - usually through Treasury. We do this regardless of whether the existing law favours taxpayers or the revenue, giving the government the opportunity to consider legislative change.
If law is open to interpretation
If the words in the Act are open to interpretation in different ways, our approach is to adopt the interpretation that is consistent with the policy intent. If more than one of the available interpretations achieves the policy intent, we will generally favour the interpretation that reduces your compliance costs.
We are responsible for ensuring that new legislation is implemented efficiently and effectively through consultation, collaboration and co-design with taxpayers, professional associations, representatives, industry bodies and Treasury.
We work with all stakeholders to ensure that the law, administrative systems and information products are consistent with the policy intent and compliance costs are minimised.
To give you certainty we offer a number of ways for you to seek advice on an issue.
We encourage you to come to us early so that we can help you to meet your commercial timeframes, as shown in figure 6. Early discussions help clarify technical issues, identify the most appropriate advice product, clarify information requirements, case plan and manage expectations.
Providing written advice on how the tax laws apply is a feature of our self assessment system and is central to our role. A ruling is our opinion on the tax interpretation of the law and is binding on us but not on the taxpayer. For class, product and private rulings, you will need to provide a full and true disclosure of all the material facts to allow us to form a view. If all material facts are not disclosed the ruling cannot be relied upon.
We may engage in compliance activities to ensure the advice sought is implemented in materially the same manner as described in the request.
We provide two categories of information:
- published information about how the law generally applies
- information specifically for you.
Our general information, such as our electronic and paper publications, provides information about how the tax law works. As this information is general in nature, it is unlikely to cover all possibilities.
- public rulings
- class rulings
- product rulings.
If general information does not fully cover your circumstances, or you are unsure how the law applies to you, another form of advice should be sought.
You may also ask us to provide advice specifically for you. Different types of advice are available:
- private rulings
- administratively binding advice.
Public rulings provide our interpretation of the tax law on priority issues that need clarification. They can help you to understand the law better and, from our perspective, they play an important role in improving voluntary compliance in a self assessment environment. In terms of your business, they give you more certainty in making decisions. Rulings can only interpret existing law and are not designed to fill gaps or amend deficiencies in legislation.
We identify the types of matters and priority topics suitable to be covered in our public rulings in consultation with your representative bodies.
There are also two specialised types of public ruling:
- class rulings
- product rulings
Class rulings enable us to provide legally binding advice in response to a request from a client seeking advice about the application of a tax law to a specific class of people about to enter a particular arrangement. The purpose of a class ruling is to provide certainty about the way the law applies to the arrangement and remove the need for each individual affected to seek a private ruling.
Product rulings enable us to rule publicly on the availability of claimed tax benefits from 'products'. A 'product' refers to an arrangement in which a number of taxpayers individually enter into essentially the same transactions with a common entity or group of entities.
Product rulings give certainty about the tax consequences of entering into a particular arrangement - provided the arrangement is carried out in accordance with details in the product ruling. We expect the highest levels of disclosure in rulings applications.
We do not sanction or guarantee products as investments. We give no assurance that products are commercially viable, that charges are reasonable, appropriate or represent industry norms, or that projected returns will be achieved or are reasonably based. You and your financial advisers must form your own view about the commercial and financial viability of the product.
Private rulings allow you to self assess if the law or factual circumstances make you unsure of the correct tax treatment of a transaction.
To reduce uncertainty you can apply for a private ruling - you can ask to be 'assessed' in relation to an existing or proposed transaction, including the application of a general anti-avoidance provision.
We will work with draft material for prospective transactions however the draft documentation must be materially similar to the end product. We may also ask for more information and can make assumptions in some circumstances based on our understanding of the information you have provided.
We must determine your tax position by the proper application of the tax law to the facts of your case.
You may not need to seek a private ruling if there is an existing public ruling and there are no material differences between it and your particular circumstances.
Private rulings can be useful in obtaining our views on uncertain legal positions. Under the law, you can object to a private ruling decision. If you object, we may ask you for further submissions to support your argument.
Figure 6 Ongoing dialogue
Priority ruling process
We recognise that significant transactions can sometimes arise quickly and you may need an urgent ruling from us. Certain private and class rulings may qualify for inclusion in our priority ruling process.
We use this process to manage tax risks associated with time sensitive, prospective transactions that:
- are of major commercial significance and require consideration at board level
- have a tax outcome that is a critical element of the transaction
- have complex law or facts that need to be analysed.
- For inclusion in our priority rulings process, the entity must:
- notify us as soon as practicable after the transaction is first seriously contemplated
- agree to provide an application incorporating a full brief with
- all relevant information
- all issues identified
- position for and against
- timeframes identified.
General anti-avoidance rule
You may consider requesting a private ruling on the application of one of the general anti-avoidance rules (GAARs) to a specified scheme and any particular tax benefit in connection with or from that scheme. GAARs that may apply include Part IVA in the Income Tax Assessment Act 1936 (ITAA 1936) and section 165 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
Private rulings on the application of a GAAR will need a thorough examination of the facts and purpose of each step in the overall scheme and this may delay the issuing of the ruling or result in a qualified ruling.
To minimise delays, you may wish to consider asking us to consider the application of a GAAR about specific issues or concerns (that is specific tax, including indirect tax, benefits) rather than asking us to consider if a GAAR will apply to the scheme in general.
The GAARs Panel helps us to administer these rules.
The panel is comprised of a range of business professionals and senior ATO officers - see General Anti-Avoidance Rules Panel.
Administratively binding advice
Administratively binding advice is written advice that we give you in limited circumstances - usually when the law does not allow us to give you a private ruling.
For example advice about:
- the tax consequences to a company planning a takeover bid of another company (without the consent of the target company)
- a scheme proposed by a company that is not yet incorporated
- a scheme where private or public infrastructure matters are raised and there are no entities yet in existence that can request a private ruling.
You can expect us to:
- progress matters within the agreed timeframes
- maintain open dialogue and keep you informed of the progress of rulings, including where complex cases may take more than 28 days
- make information requests clear and unambiguous
- contact you in order to understand the facts and discuss any concerns we might have
- provide you with a central point of contact and access to the relevant decision makers.
A full and true disclosure of the material facts will allow us to form a view. If all relevant material facts are not disclosed the ruling cannot be relied upon.
To help us provide advice in timeframes that meet your business needs it is best to:
Talk to us early
Talk to us about transactions as early as possible to help us meet your deadlines. Even if there is not enough information available to start formal discussions, early notification helps us to plan ahead so we can have the right people available once you are ready to proceed. It also gives us the opportunity to understand the commercial context you are working in.
Have information ready (pre-ruling)
Be ready to explain the transaction and the technical issues that concern you at a pre-lodgment discussion. We will help you work out what should be included in your application, including information we will need and issues you should address.
Work within timeframes
Send us your comprehensive application and the information we need by the agreed times. We understand that tax is not your only concern when a major transaction is being developed and it is a busy time for you.
We expect you to:
- contact us as early as possible so that we can give you the best opportunity to meet your timeframes
- understand that complex cases may take more than 28 days
- maintain open dialogue on the issues and facts
- supply information within agreed timeframes
- provide us with a central point of contact.
We will tell you of any concerns we have as early as possible. If we become aware that our interpretations of the law diverge, we will inform you, while we are still working through the issues. It is only the final ruling that can be relied upon.
We encourage you to discuss the issue at hand with us and we will include our decision makers in these talks.
As part of our ongoing relationship, or in the course of preparing a private, class or product ruling, you may ask us to indicate our likely view of the law about a situation.
We provide indicative advice only if certain exceptional criteria are met and you acknowledge that the advice is not binding on us and should not be relied on as representing our view of the law on the matter.
A note about general advice and our publications
Guidance may be given in writing or orally, including by one of our publications.
We provide guidance to help taxpayers understand their obligations and entitlements under the laws we administer. Guidance is not binding on us.
An environment of self-assessment and cooperative compliance is the cornerstone on which our tax system is built. Supporting your voluntary compliance is our preferred way to work with you. If something is not right or your understanding of a situation has changed, we offer a number of processes that you can initiate to sort it out and fulfil your tax obligations. By using these processes you can achieve greater certainty for your business and help minimise your compliance costs.
We accept that errors can and do happen and that changing circumstances, reflection or review may mean that you adjust your view on how a particular transaction should be treated. If this happens, let us know of any changes in your position or any error by making a voluntary disclosure. Making a voluntary disclosure if you identify issues helps keep the tax system fair and efficient. If we contact you about your return or activity statement, it usually means that we have already found something that does not fit with the information we have available.
If you are genuinely trying to report correctly or are genuinely trying to correct an error, you may receive a reduction in the penalty treatment and in some cases, interest charge remissions.
Contact us about any changes in your position or any errors in your tax affairs as soon as you find them. If the transaction has already occurred or your tax return has already been processed, make a voluntary disclosure.
Making a voluntary disclosure is where you:
- advise us of an error or omission in a statement that leads to you having to pay more tax (shortfall amount) for that accounting period
- provide information in an agreed format sufficient for us to identify the shortfall amount.
A voluntary disclosure can be triggered by:
- you through internal audit processes, internal business reviews, advisers, new acquisitions, or information in the media
- us through questionnaires, risk reviews, rulings, or issues identified in the compliance program.
Voluntary disclosures may be given in writing, electronically or by phone. To assist us to determine the shortfall amount include relevant facts and sufficient information to enable us to work out the correct amount of tax to be paid.
If you make a voluntary disclosure before we notify you that we are starting a review or an audit, you will generally not have to pay any shortfall penalty for making a false or misleading statement. In certain circumstances, if you make a voluntary disclosure after you have been advised of a review or an audit, you may still be entitled to a reduction in penalty. If a voluntary disclosure is made after notification of an audit or a review, the voluntary disclosure itself is not a ground for remission.
If you provide us with information that you identify as being a voluntary disclosure (or could potentially be regarded as a voluntary disclosure) we will discuss it with you. In these discussions, we will advise you if the information is sufficient for it to be considered a voluntary disclosure or if you need to provide additional information. There may also be a need for us to review the situation to determine whether it can be accepted as a voluntary disclosure.
If you do not have sufficient information to meet the requirements of a voluntary disclosure, we can help you. Contact the large business phone service on 1300 728 060.
If you need to correct something on your tax return, even if it has not yet been processed, you can request an amendment.
The reportable tax position (RTP) schedule for income tax is part of our integrated approach to working with our largest business taxpayers. It supports a more contemporaneous review of, and engagement with these taxpayers, supporting increased taxpayer transparency in a targeted and efficient manner.
Our largest businesses must disclose their most contestable and material tax positions.
For the 2012 and 2013 income tax years, the RTP schedule is being piloted with a small number of taxpayers who have been advised in writing that they need to lodge the RTP schedule. Taxpayers that have entered into an income tax annual compliance arrangement (ACA) for the relevant income year will not need to complete the RTP schedule.
RTPs are material and contestable positions that come under one or more of the following categories:
- a position that is about as likely to be correct as incorrect, or is less likely to be correct than incorrect
- a position where uncertainty about taxes payable or recoverable is recognised or disclosed in the taxpayer's or a related party's financial statements
- a reportable transaction or event.
You only need to disclose in the RTP schedule material tax positions that have not been previously disclosed either:
- in an application for a private binding ruling
- under an advance pricing arrangement (APA) or an application for an APA that has been accepted into the APA program
- in a Reportable tax position early disclosure form.
We will use RTP disclosures to:
- better understand tax risk for taxpayers, industries and the large market
- further refine our risk-differentiation framework (RDF) categories to enhance the risk-based choices we make to prioritise our work
- improve our dialogue with large businesses about their risk categories and corporate governance
- help us focus our compliance activities
- identify areas of uncertainty in the tax law that may need
- law clarification or legislative improvements
- further advice and guidance by us.
ACAs are the centrepiece of our efforts to build enhanced positive relationships and compliance outcomes with large business. ACAs are most suited to those large businesses we classify as 'key taxpayers' under our RDF, see Key taxpayers. ACAs are available for income tax, GST, excise, petroleum resource rent tax, minerals resource rent tax and FBT or any combination of these taxes.
An ACA improves practical certainty for you by considering tax risks in real time and complements other products and services such as our rulings program. It offers a 'no surprises' approach which benefits both of us.
The ACA is an administrative arrangement developed to manage the compliance relationship with you in an open and transparent environment. As an administrative arrangement, the terms of an ACA will not override the application of the law and the policies administered under those laws. By committing to work in a frank and transparent environment with an assurance based approach we can tailor your compliance relationship and experience, rather than working through traditional compliance approaches such as audits and risk reviews.
Building upon the broad principles of an ACA we will collaboratively develop your arrangement to ensure that it is suitable and takes into account your business operations. Collaboration, transparency and trust are the key features throughout the ACA process.
The ACA process facilitates a lower compliance cost when compared to alternative compliance approaches for example audits and reviews.
ACAs ensure that all interaction with us is coordinated, prioritised and managed across the ATO. Subject to true and full disclosures, and a commitment to adhering to the corporate governance principles (see Good tax governance), ACAs provide practical certainty for your tax return, shortly after lodgment. This certainty is subject to issues that we advise may need further examination.
A compliance plan will be developed outlining agreed processes and timelines to resolve any unaddressed issues.
Key benefits of entering into an ACA include:
- a speedier resolution of technical issues (in real time)
- administrative solutions to resolve compliance irritants
- centralised points of contact and ongoing dialogue on technical matters
- a closure of returns to further ATO review
- concessional treatments of penalties and interest
- a plan outlining agreed processes and timelines
- the possibility of extension of thresholds for correcting GST mistakes for a GST ACA
- not being subject to post-lodgment risk reviews or audits for periods and income years covered by an ACA
- not needing to complete the RTP schedule for income years covered by an ACA
- not being subject to a pre-lodgment compliance review.
APAs provide you with the opportunity to reach an agreement with us on the future application of the arm's length principle to your dealings with international related parties. APAs may be unilateral which involves your business in Australia and us, or bilateral or multilateral which involves an agreement between two or more tax administrations and their respective taxpayers.
The arrangement generally covers a period of three to five years and may be reviewed if the trading circumstances materially change. APAs are also subject to an annual reporting requirement.
APAs can provide certainty with the benefit of:
- ensuring the fair application of the arm's length principle to related party international dealings
- eliminating or reducing the risk of double taxation on related party international dealings (particularly in bilateral and multilateral APAs)
- eliminating the risk of a transfer pricing audit on the related party international dealings covered by the APA.
Before committing to an APA, we need to consider whether the cost and effort of obtaining an APA is proportionate to the benefits obtained. An APA application needs to contain a properly developed and documented solution.
Our role involves critical analysis rather than undertaking original work to establish the arm's length outcome. Our pre-lodgment process provides an opportunity for issues to be identified up front with the aim of facilitating successful applications.
At times, international transactions can lead to exposure to double taxation. For example, a transfer pricing adjustment in one country arising from an audit can result in the same income being taxable in two jurisdictions.
If you believe you have been or will be subject to double taxation you can apply for relief to the tax administration of your jurisdiction. If your application is accepted we will discuss your case with the other tax administration and try to resolve it in accordance with the relevant double tax agreement. This process is known as a mutual agreement procedure (MAP).
We, and other tax administrators, will endeavour to resolve any double tax issues and inform you of the agreed outcomes.
A MAP is part of the dispute resolution process and is in addition to your objection and appeal rights.
Through the tax issues entry system (TIES) you have an opportunity to raise issues about the care and maintenance of the Australian tax and superannuation systems. We jointly manage TIES with Treasury.
Care and maintenance issues are about making sure the existing law operates in the way it was intended, by correcting technical or drafting defects, removing anomalies and addressing unintended outcomes. Care and maintenance issues could involve minor policy changes, though they typically would not have a significant revenue impact.
Through TIES we try to find the best solution to issues, whether that can be done by way of a change to our existing administrative practices or by raising with the government the possibility of changing the law. Law changes will be subject to the government's other legislative priorities.
For information about TIES, how to submit an issue for consideration and a list of issues currently being managed, refer to TIES.
How we manage tax risk
For the majority of taxpayers who willingly participate in the tax system and implement sound compliance practices, our main engagement focus is the provision of advice and support to facilitate cooperative compliance. This may also include seeking information about large claims to provide assurance that the correct amount of tax is being paid.
Each year, we review your risk-differentiation framework categorisation. In many cases, the risk categorisation will not change. We will formally notify you of your categorisation, and may highlight specific focus areas during this process.
For the relatively few taxpayers with whom we have more significant concerns, our approach may have more of an enforcement focus if this is considered appropriate.
Figure 7 Managing large business tax risk
In line with our Strategic statement 2010-15, we are committed to supporting and protecting those willing to properly fulfil their civic and legal responsibilities and to be fair, but firm with those who don't.
To assist with this, we use the risk-differentiation framework (RDF) to form a view of your relative tax risk and determine the intensity of our response in a coherent and considered way.
Rather than being a report card on performance, we see the risk categories and the framework as another way of increasing transparency: letting you know how we see you, which in turn allows you to make informed choices to work more effectively with us if need be.
The RDF provides a strategic approach for directing our resources more efficiently and effectively. It provides for greater differentiation of our risk management approaches based on our considered view of taxpayers' compliance history and status.
(Speech by Bruce Quigley, Second Commissioner of Taxation to the Corporate Tax Association Convention, 7 June 2011, Melbourne)
The RDF is based on the premise that our risk management approach to tax compliance should take account of our perception of both the:
- estimated likelihood of you having a tax position that we disagree with or having through error or omission misreported your tax obligations (as evidenced by your behaviour, approach to business activities, governance, and compliance with tax laws)
- consequences (dollars, relative influence, impact on community confidence) of that potential non-compliance.
Using the framework, we place you into one of four broad risk categories (higher risk, medium risk, key taxpayer and lower risk) for each relevant tax type (income tax, GST, excise). The risk categorisation does not in any way influence the outcome of a possible risk review, but it does influence the formality and intensity of it.
Figure 8 Risk-differentiation framework
Because our view of your risk is informed by our understanding of other large businesses, you may have a different perception of your tax risk. It is likely that there will always be some large businesses that we perceive have a relatively higher risk compared to other large businesses, and understandably these will face more intense scrutiny by us.
Our perception of the likelihood of non-compliance is an informed professional judgment based on assessing a range of risk factors for each tax type. We undertake a moderation process to ensure the RDF categorisation is consistent and supported by evidence.
While no one factor is definitive, the evidence that we consider includes:
- your compliance history, including
- the level of disclosure and engagement around significant transactions you undertake
- the history of adjustments from previous compliance activity
- the fullness of disclosure and cooperation demonstrated in response to any enquiries
- your lodgment and debt history
- the level of transparency demonstrated by you in keeping us informed about proposed significant transactions or potentially contentious issues
- whether or not you may have adopted a potentially contentious tax position
- your effective tax rate
- an organisational structure that facilitates transactions through secrecy and low-tax jurisdictions, with no commercial basis other than to reduce tax paid in Australia
- the quality of your tax risk management and governance processes
- the capability of your staff, systems and processes that produce your tax records
- information collected from industry associations, domestic and foreign regulatory bodies, and our own internal intelligence areas
- your business performance over time compared to your tax outcomes and that of your industry peers
- the output of various risk filters, generally for risks identified in the compliance program.
Our perception of the consequence of non-compliance is made by examining and understanding your business, including factors such as your market share, ability to affect the tax compliance of competitors in the industry, annual turnover, taxes paid, assets, amounts reported on activity statements, and amounts reported for excise obligations including WET and fuel tax credits.
It should be noted that your position on the consequence axis of the RDF model does not influence our perception of your compliance behaviours. For example, key taxpayers and lower risk taxpayers are both equally regarded by us as being relatively more likely to fulfil their responsibilities and likely to have a positive attitude to compliance.
If we identify a potential risk or issue, we use the RDF to suggest how we will initially engage with you to resolve the issue. We apply the most appropriate treatment strategy based on your position within the RDF (figure 8). By doing this, we ensure your circumstances and our perception of the likelihood and potential consequences of the issue are taken into account to select the most effective method of resolution.
Four broad groupings are identified in the RDF.
Higher risk taxpayers
For higher risk taxpayers, we assign appropriate resources to allow for continuous review. Our activities may include comprehensive audit and other intensive risk analysis approaches. This will enable us to identify and understand risks as they arise and provide information about our possible concerns; allowing the taxpayer to make a more informed choice about their compliance approach.
While we take all relevant facts and circumstances of a case into account, if you are identified as a higher risk taxpayer, we are more likely to use our formal powers of information gathering in the event you are not open and transparent with us.
If you are identified as a key taxpayer, we have a particularly keen interest in your risk management and governance frameworks to mitigate tax compliance risks. We expect key taxpayers to fully disclose potentially contentious matters to us as they arise.
We will assign the necessary resources to develop our relationship with you and increase our understanding of your business.
If a potentially contentious matter is identified, we will work with you to resolve the matter and evaluate your compliance with the law. We are less likely to use our formal powers of access and questioning when seeking additional information, though we will still escalate matters if we are unable to obtain the information and evidence needed to form a view in a timely manner.
Key taxpayers are encouraged to enter into an annual compliance arrangement. These arrangements can provide real-time, practical certainty and reduced compliance costs.
Medium risk taxpayers
For taxpayers identified as medium risk, we will undertake targeted activities to deal with identified tax compliance concerns. These activities are more likely to be reviews and audits. We may also contact you to seek assurance that a particular transaction has been treated correctly.
To achieve greater consistency in the way we address specific issues we may use project based approaches that group large businesses with similar tax risks. These risks are normally identified in our compliance program.
Lower risk taxpayers
The majority of large businesses have a lower risk categorisation. For these taxpayers, we monitor intelligence to confirm your lower risk categorisation. This can involve activities such as requesting targeted information about specific issues we have identified in the market, visiting you to gain information about your business operations and our normal internal review processes.
We aim to work with you cooperatively to resolve any tax related issues and agree on mitigation strategies. We try to do this as close to the transaction as possible. This will give you greater confidence on the tax positions you take and will make it easier for you to comply.
The framework we use is dynamic and as we obtain more information about your compliance approach, our view of your risk may change.
Communicating our view is an important part of our relationship with you.
We have a duty to ensure that we have sound reasons for taking a view. To achieve this, we have developed a corporate approach to ensure our interpretive and analytical skills are fully applied to these decisions, including the use of external experts in some cases.
This approach is complemented by open discussions about your risk categorisation. When there are two opposing views on the application of the law, we consider using alternative dispute resolution processes early in the process to resolve the dispute in the most informal, cost effective and efficient way possible.
Our approach is closely aligned with the OECD Forum of Tax Administration guidance papers on tax risk management.
The value, volume and complexity of transactions undertaken by large business have inherent risks for tax compliance.
We apply a level of risk analysis to all large businesses.
One of our approaches is to closely examine significant transactions and business results that show inconsistencies between tax and economic outcomes. We also assess the effectiveness and accuracy of your business systems, including tax risk management and governance systems.
Specific compliance risks that we focus on are detailed in our compliance program, which is updated each year.
Your checklist of what may constitute a risk:
- Related party cross-border and tax haven dealings if a tax deduction is made in Australia with no corresponding and appropriate amount of assessable income.
- Unintended or inappropriate outcomes if there are complex interactions between the consolidation provisions, other parts of the tax law and external regulatory frameworks.
- Complex structures and intra-group transactions associated with generating tax benefits unrelated to the economic substance of your commercial activity, including exploitation of the GST groups and joint venture provisions.
- Tax benefits from financial and other arrangements that are disproportionately high compared to your limited financial exposure, or if there is a divergence between the real and claimed economic substance of your business activity.
- Arrangements to transfer or create tax benefits in circumstances not contemplated by the law.
- Characterisation of transactions, for tax purposes, that is at odds with their economic substance.
- Distortions and inconsistencies in market valuations.
- Lack of capacity and/or capability in tax governance processes and personnel.
- Not fully disclosing information on contentious transactions or only disclosing selected information on parts of a transaction.
- Not disclosing the most contentious transactions.
- Implementation of a transaction in a materially different way to that described in a product ruling or public ruling relevant to the transaction.
Active compliance approaches
In an environment of self-assessment our primary focus is on supporting you to voluntarily comply with your Australian tax obligations.
If we identify potential issues, our response includes a mix of service, help and active compliance approaches. How we initially approach you to address tax risk depends on how you have been categorised under the risk-differentiation framework (RDF), see How we manage tax risk.
Australian law requires that the correct amount of tax is paid in Australia. To ensure this occurs we have developed a broad range of services and active compliance products. For active compliance we are mainly referring to risk reviews and audits.
Active compliance work starts when risks are identified. The specific nature of the risk determines the scope, depth and breadth of our approach. We will try to choose an approach that minimises inconvenience and disruption to you.
If non-compliance is the result of uncertainty, we will seek to reduce that uncertainty by explaining our view of the law. If non-compliance arises from administrative issues we will work with you to make compliance easier.
We are improving our compliance approaches for GST and excise to increase our focus on early intervention and prevention. Instead of relying solely on reviews and audits as the basis of our interaction, we are also using assurance based products that promote self-review and collaborative resolution of GST or excise issues.
We may use workshops for large businesses categorised in our RDF as key taxpayers or lower risk taxpayers.
Assurance workshops are an opportunity for you and your client relationship manager (CRM) to work together to identify and resolve potential GST or excise issues in an open and transparent manner. We encourage you to discuss the suitability of a workshop with your CRM.
We will co-design the workshop agenda with you. Depending on the workshop agenda, specialists from other tax areas may be invited.
There are two types of assurance workshops available:
These workshops are intended to help you identify and address weaknesses in your governance and tax risk management processes and may also enable us to improve and tailor our interactions with your business.
These tailored workshops will enable us to work with you to understand and resolve specific GST or excise issues. They allow us to jointly address issues in real time, especially if complex or unusual transactions are about to take place (such as mergers or acquisitions) or if transactions that commonly result in errors have already taken place.
Figure 9 Risk analysis and case selection
Risk review and audit processes (detailed in appendix 6 and appendix 7) show our generic processes for carrying out more detailed risk reviews and audits of large businesses. Although figure 9 reflects the usual progress of these processes, we may not necessarily follow every step depending on the circumstances. For example, you may make a voluntary disclosure during a risk review that resolves the issue.
We review all large business at a high level using our risk filtering processes. In addition, if appropriate, we will use a real-time compliance approach that provides for the identification and assessment of risk.
We will escalate some cases to audit to confirm whether non-compliance has occurred. The majority of audits lead to an adjustment.
In conducting a risk review (or audit) we focus on:
- planning to agree on timeframes and the scope of active compliance activities
- open dialogue with you, including initial discussions with you on any matter that has attracted our attention and sharing of the risk hypothesis
- gaining an understanding of your business context and environment by using the BISEP model (see appendix 1)
- gathering relevant information and evidence to get the full facts quickly
- making the right tax decisions according to the law.
Risk reviews tend to have a wide context to establish if there are any material concerns for us. Their aim is to assess risks and their severity. However they are not an in-depth examination as this is the domain of an audit. The audit involves a deeper verification of the facts and a determination of our view about those facts.
In some instances, the nature of transactions and our knowledge of the compliance risks mean that the case proceeds directly to audit from the risk analysis process. These may include circumstances where we consider your business or particular arrangement is higher risk, the case involves carrying forward a previous audit, is time sensitive or we perceive a collection risk.
Risk reviews form a major part of our compliance work. We use these reviews to identify whether there may be tax risks. They help us to determine whether there are any compliance issues requiring a more in-depth investigation and response.
We conduct several types of risk reviews to support voluntary compliance. Our approach and engagement is differentiated according to our assessment of your risk using a likelihood and consequence of non-compliance approach in line with the RDF.
Broadly speaking, the type of risk review which will be applied will be influenced by your consequence of non-compliance, that is, higher consequence or lower consequence.
For income tax, we support the real-time compliance approach applied to higher consequence taxpayers through the use of a pre-lodgment compliance review (see appendix 5).
In a risk review we place a strong focus on gaining an understanding of your business context and environment - by using the BISEP model - and of your tax corporate governance.
For more information on the types of risk reviews, see appendix 4.
The risk review process provides both of us with an opportunity to resolve concerns about compliance issues. In most cases this can prevent the need for an audit. We encourage you to contact us if you identify any errors. If you make a voluntary disclosure, you may be entitled to a penalty reduction.
The review process may be conducted without the need to contact you for additional information. Your risk category will indicate whether we need to focus on one or more specific risks or review your entire business operations and whether we need to develop an in-depth understanding or conduct a high level analysis. For income tax, your risk category will also indicate the extent to which we will review your business and key transactions before the lodgment of your return.
The information we need will vary depending on the stage of the process we are in. For example, a risk review may cover a wide context of materials, such as trial balance and key papers, where an audit may need a deeper level of information, such as contracts. Generally, we will ask for information from you first and then from third parties such as your intermediaries only if we need to.
Based on the analysis of information obtained and discussions with you, we will rate each of the risks that have been assessed. The risk matrix will provide the guidance to rate each risk in terms of consequence and likelihood. These two factors will combine to provide an overall risk category.
Risk review outcomes
At the end of any risk review we will discuss the outcomes with you, advising if we are satisfied with your compliance or consider further action is warranted.
If the risks are found to be significant, it is highly likely we would follow up with audit action. If the risks are not deemed to be significant, we would usually not proceed further unless there were other concerns raised.
If it has been determined that an audit is necessary, we will keep you informed about our plans. Depending on the nature of the risks, the discussions may also cover possible mitigation strategies which you might choose to apply to reduce the likelihood of an audit, or to mitigate any potentially adverse effects.
At the end of the risk review process we will write to you outlining the final outcome.
Audits are more comprehensive than a risk review and involve intensive case examination where material underpayment of income tax, GST or excise is a risk. Audits provide a means for us to:
- verify whether the proper tax has been paid in cases where we identified risk - including gathering evidence or proof as needed
- understand the causes of any non-compliance and address them for the past and the future
- identify areas where the law may need clarification or where audit processes can be improved.
An audit typically arises following a risk review and will test the review's conclusions. Refining the scope of the audit may include (but is not limited to):
- eliminating issues
- adding new issues
- determining which income tax years will be subject of the audit.
If we identify additional risks during the audit, we may broaden the audit's scope. This requires approval from a panel of senior officers, and the decision will be communicated to the taxpayer.
In most cases, an audit involves agreeing on a plan focused on collecting detailed information and undertaking analysis. During information collection phases, auditors will have more contact with you and may spend an additional amount of time at your premises, examining documents and processes and discussing issues with your key personnel. After the audit, we will provide you with our view.
Timeframes for audit
We would expect a large business audit to be concluded within two years. Full cooperation is assumed in meeting this timeframe. It also requires the case manager to purposefully manage the case. While we prefer a cooperative and informal approach to information gathering, we will use our formal powers if there are delays that adversely affect planned case cycle times.
Both parties will seek to:
- have ongoing, open and frank discussions and agree on a case plan upfront
- participate in meetings to identify any issues that could delay or disrupt the process and agree on contingencies
- agree on realistic timeframes
- provide relevant information about processes as well as facts and evidence in a timely manner
- clarify issues as they arise so that they can be resolved efficiently
- provide prompt and ongoing access to key personnel and escalation points
- undertake genuine efforts to resolve disagreements, including consideration of dispute resolution processes, see Resolving disputes
- recognise that sometimes we may have to agree to disagree
- agree upfront on how to handle relevant documents covered by legal professional privilege, accountants' concession or corporate board documents on tax compliance risk - refer to PS LA 2004/14 Access to 'corporate board documents on tax compliance risks'.
You have the Commissioner's guarantee that you can provide open and honest feedback, or raise concerns without it influencing our view or future interactions with us.
At the commencement of a review or audit, we will notify you of the key ATO contact for your case. If you have any issues with how the case is being conducted or the tax risks involved, you should raise these issues with the case officer first.
If you are not satisfied with the case officer's response, you should contact the case officer's team leader. You can also raise concerns and issues through either your key client manager or our relationship management meetings.
If you continue to remain unsatisfied with our response, you can request the team leader escalate the issue to their immediate manager, who will consider the matter and contact you to discuss your concerns.
Talking to us early will help resolve issues and, if issues need to be escalated, you will have access to our decision makers.
In conducting risk reviews and audits we need to understand your business context and environment. If appropriate we will engage experts on particular industries or specific issues (such as financial analysts and market valuers).
In developing this understanding we use the BISEP model (see appendix 1).
This model covers a wide range of relevant topics and ensures that we have a common view of your business.
These topics are drawn from the audit accounting standard ASA 315 - Identifying and Assessing the Risks of Material Misstatement through understanding the Entity and its Environment.
Though we can use both formal and informal powers we prefer to work informally and build good relationships to minimise cost and disruption to both parties. Our approaches will be guided by your risk category, as described in How we manage tax risk. There will be times when we'll disagree and it's important that we work together to reach an outcome.
We use formal powers only if the circumstances require it - for example, when it is requested by you, when informal requests for information have not been satisfied or if we have not been able to use an informal approach to gain access to senior personnel to obtain an exact picture of an arrangement.
We often need to gather substantial amounts of information and evidence when examining complex compliance matters. We realise that it is important you have a clear understanding of our request, why we need the information and how we think it relates to the matter under review.
If we can get the full facts quickly, along with the relevantsupporting evidence, this enables us to establish and inform you of our position as soon as we can. To help resolve issues it is better for us to have the same factual position as your decision makers.
Timely information is essential for us to efficiently resolve compliance activities. We will develop timeframes and protocols concerning provision of information as part of the agreed audit plan. In our experience, delays in receiving information are one of the major reasons the time required to conduct a review or audit is extended.
Information includes documents evidencing an intention, election, choice, estimate, determination or calculation. Documents can include paper and electronic communications including emails.
Efficient information gathering relies on:
- effective planning
- full cooperation
- early and ongoing dialogue
- timely escalation if issues arise.
Ongoing and open discussion about information requirements helps us to:
- understand your business and the environment that you operate in
- keep the information gathering process informal and avoid unnecessary escalation
- enhance the information flow and actively manage information requests
- build and enhance our cooperative relationship.
We prefer an informal approach to gathering information. Our informal approach can often lead to a resolution of matters, even in cases where there is a potential risk of litigation.
The informal approach is premised on the notion that you demonstrate your proactive support and action to meet our information needs. This means (as part of our expectations) assuring or advising us:
- that searches for information within the large business group, including where relevant its overseas associates, have been undertaken to the greatest possible extent
- that you have provided full details of what information is available to meet our requests, and when such information will be available
- if a staged approach to providing information can be undertaken
- that information provided is in user-friendly formats that enable us to properly analyse information or data readily
- immediately if you encounter difficulties in meeting our timeframes and the actions you will take to mitigate delays.
When issues arise we expect that the compliance team will make every reasonable effort to resolve them and, if necessary, the matter will be referred to more senior officers.
You should be aware of your obligation to provide full and accurate information and the consequences for failing to do so. An informal approach to information gathering still means you are accountable for the accuracy and completeness of information you provide.
An appropriate record of our conversations, including meetings and interviews, are an essential part of the informal approach. In normal circumstances we will provide you with a summary of the key issues discussed and the agreed action items resulting from the meeting. With prior consent, we may make a verbatim record of important meetings and interviews.
Remember, it is an offence to make a false or misleading statement to a tax officer even if the conversation or interview is undertaken on an informal basis (under Subdivision B of Division 2 of Part III of the Tax Administration Act 1953).
Mutual expectations during informal approaches
Informal approaches presume full cooperation.
You can expect that we will:
- engage you in constructive dialogue so that our information requests are clear and unambiguous
- plan our information gathering around the risk hypothesis and clearly stated evidentiary needs - the plan will include agreed milestones and timeframes
- have face-to-face discussions with you to develop the key information gathering questions if appropriate
- actively manage information requests with timely escalation, if needed, when delays or unforseen events arise
- adopt a transparent process before using formal powers.
We expect that you will:
- engage in constructive dialogue with us
- meet agreed timeframes
- provide complete and timely information
- provide access to key decision makers and senior personnel
- work with us to ensure that the compliance activity proceeds in an efficient and timely way.
In some cases relationships can be tested. The change from a cooperative to a less cooperative relationship is often difficult to pinpoint because it generally results from several incidents or actions rather than a clearly identified single point. We acknowledge that differences will occur; however persistence, openness and a willingness to understand the other view or position will help in resolving any issues.
If there are any issues that need to be escalated, you will have access to our decision makers.
Generally, when we decide that using formal powers is necessary, we will advise you that we intend to use them and the reasons for doing so.
We will use formal information gathering powers when the informal process is no longer productive or if your circumstances, history or behaviour indicate that a formal approach is warranted.
There are some situations where we may adopt a formal approach in the first instance. This includes where there:
- is a history of uncooperative behaviour
- are privacy, contractual, or confidentiality obligations - for example, former employees or third parties.
In other cases it may be necessary during the course of an audit or a review to move from an informal to a formal approach. This can occur where:
- full cooperation is lacking
- there are ongoing or persistent delays in providing information
- it is necessary to obtain an exact picture of an arrangement or transaction.
Examples of when we would use formal powers include where:
- the information provided informally only partially answers our requests
- a response has qualifying statements attached to it or are redacted
- access to senior personnel involved in the issues is restricted, for example, in cases where intention is an issue
- representatives request that everything be put in writing and take a legalistic approach to responding
- documents, people and other evidence are purposely placed outside our jurisdiction
- claims of legal professional privilege or the accountants' concession and corporate board documents on tax compliance risk are made without providing sufficient information to enable us to properly assess the veracity of their claims.
Scope and relevance of our requirements are matters for us to determine. For example:
- If a document contains any information relevant to the issues under examination then the document in its entirety is a relevant document.
- If there is an issue as to whether a document is relevant then the document should be made available for examination by us to determine its relevance.
- Assertions that a document has information that is 'commercial-in-confidence', contains trade secrets or proprietary interests are not acceptable as a basis for redaction or non-disclosure.
- Where there are sensitivities around information sought, you should speak with the compliance team as soon as possible to resolve any concerns.
- If a response containing factual information to an information request is made subject to some form of qualification, condition or caveat, such as 'without prejudice', then this may be considered to be a partial response to our requests and a formal notice may issue.
- While we respect your right to assert that legal professional privilege, accountants' concession or that documents are corporate board documents on tax compliance risk may apply in whole or in part to a document we still need you to provide sufficient information for us to determine if the tests for these rights or concessions properly apply.
- If a document is withheld, or redacted in whole or in part, without appropriate justification, including not providing sufficient information to determine whether the test for legal professional privilege or other concessions properly apply, then this will constitute a partial response to our information requests and a formal notice may issue. The attempt to redact part of a document on the basis of the accountants' concession or corporate board documents on tax compliance risk would be rejected on the basis of the sole purpose test.
Mutual expectations during formal approaches
You can expect that we will:
- treat you fairly and, as far as possible, in a non-intrusive way
- give you reasonable notice of our intention to use our formal powers in all but exceptional circumstances
- explain why we are requesting information
- clearly identify the objects of any examination
- keep information requests relevant and focused
- consider requests for an extension of time to comply with a notice
- keep records of your personal information safe and secure
- respect your right and discuss with you the basis of any claims for legal professional privilege, the accountants' concession or that documents are corporate board documents on tax compliance risk. This will not adversely impact our view of your cooperation.
We expect that you will:
- provide a full response in a timely manner to all enquiries
- notify us if you have difficulty complying by the due date
- be prepared for any formal interview.
To help determine our position, we sometimes engage external experts such as industry specialists, valuers, economists and legal counsel.
In some circumstances, for example, in complex or sensitive cases, we will appoint a specialist or case leader to help identify and resolve issues.
If we consider that general anti-avoidance provisions - such as Part IVA - may apply, we will refer the case to the ATO Tax Counsel Network for review. This will usually occur before we provide you with a position paper.
The position paper will set out our view on the issues including the details of who to contact to discuss the matter. You will have the opportunity to respond and we will consider your response and advise you of our decision.
General Anti-Avoidance Rules Panel
The General Anti-Avoidance Rules (GAAR) Panel helps to administer Part IVA and other general anti-avoidance provisions. It ensures that decisions about applying these provisions are objectively based and well-considered. The panel's role is advisory but our decision maker must take the panel's advice into account.
Matters are generally referred to the panel after we have issued a position paper and have considered your response.
The panel may consider matters without a taxpayer response where:
- the taxpayer has chosen not to respond to the position paper
- there are time restraints
- a reasonable time has passed without a response.
To help the panel provide us with advice, you will usually be invited to address the panel meeting. Before attending a panel meeting, you will also be asked to provide a written submission to the panel.
The standard period in which we can amend an assessment is four years for large business taxpayers. We will work with you to establish timeframes to minimise disruption.
Different rules relating to the amendment period can apply to some cases where transfer pricing, research and development and capital gains tax is involved. Effective lines of communication and the level of cooperation we receive from you will influence the audit's progress.
Generally, you will be given every reasonable opportunity to present your case before an amended assessment issues. We are conscious of possible financial and reputation risks associated with a debt adjustment and we take due care to ensure that they are based on reasonable grounds.
If we make an adjustment to your activity statement as a result of compliance activity we have undertaken (whether to increase or decrease your liability) we will do this by making an assessment and issuing a notice of assessment. For tax periods commencing on or after 1 July 2012 this will usually be an amended assessment. Generally, under our processes we need to provide details and reasons for any adjustment to you before any such assessment is issued. We will give you the opportunity to raise any concerns before the assessment issues. Care is taken to ensure that any adjustments are based on reasonable grounds.
If we identify an adjustment to your excise liability, we will work with you to amend the appropriate excise return.
Should you disagree with an identified adjustment in excise liability, generally you will be given every reasonable opportunity to present your case before a demand for an amount equal to the amount of excise duty issues.
If you make a false or misleading statement and did not take reasonable care in making the statement, the law imposes penalties based on levels of culpability. The facts and circumstances of a case ultimately dictate which category of penalty applies, if any.
In many instances a large business will have a reasonably arguable position (RAP) about contentious income tax and minerals resource rent tax issues. We will give you the opportunity to discuss the merits of your case before any decision is made concerning penalties. If you do not have a RAP you may be liable to a penalty, even if you have taken reasonable care.
The amount of a penalty applying in these and other circumstances may be reduced through making a voluntary disclosure. There are significant reductions if you:
- make a disclosure before you are notified of an ATO audit or risk review starting
- make an early disclosure (such as seeking a private binding ruling)
- make a disclosure of the position taken during the risk review stage of any compliance activity.
If we have concluded that penalties should apply we will tell you our reasons and give you an opportunity to present your views or further information which may affect the decision. If following this we still consider that penalties apply, we will give you a written statement of the reasons for the decision to impose the penalty and not to remit all or part of the penalty, including findings on material questions of fact. This will refer to the evidence on which our findings were based.
The vast majority of large business taxpayers and tax professionals act ethically and professionally and contribute significantly to maintaining the integrity of the tax system. The promoter penalty legislation is aimed at dealing with those who market unsustainable arrangements to the detriment of both taxpayers and ethical advisers.
Penalties can apply directly to individuals as well as large businesses.
The provisions are intended to apply in two circumstances:
- when a promoter engages in conduct that results in them or another entity being a promoter of a tax exploitation scheme
- when an individual or entity implements a scheme promoted on the basis of conformity with a product ruling in a way that is materially different to that described in the product ruling.
The legislation is aimed at schemes that would attract significant penalties if used by taxpayers. Important aspects of the administration of the measure have been co-designed with the National Tax Liaison Group sub-committee.
Two law administration practice statements have been published for the administration of the promoter penalty laws:
- PS LA 2008/7 Application of the promoter penalty laws (Division 290 of Schedule 1 to the Taxation Administration Act 1953) to promotion of tax exploitation schemes
- PS LA 2008/8 Application of the promoter penalty laws (Division 290 of Schedule 1 to the Taxation Administration Act 1953) to schemes involving product rulings.
The tax laws impose interest charges from the date a tax liability originally should have been paid.
The tax laws impose interest charges to:
- ensure that taxpayers who have underpaid their tax during this period do not receive an advantage over those who have paid their tax
- compensate the government for the impact of not having the funds.
Because interest charges are compounding, they can quickly add up. The law also provides us with the discretionary power to remit interest charges in certain circumstances.
Where a tax shortfall results from an audit or review and interest applies, we will give you a written statement about the reasons for the decision not to remit all or part of it. This statement will refer to evidence on which our findings were based.
Our approach to collecting tax debt focuses on early intervention. By engaging with you early - as soon as a debt arises - we can help you manage your obligations and prevent your debt from escalating.
If you choose not to engage with us and discuss payment of outstanding liabilities, including debts in dispute, we will use stronger measures if appropriate. This ensures we create a level playing field for all taxpayers and reinforces community confidence in the tax system. Stronger measures include:
- collection action
- garnishee notices
- director penalty notices
- statutory demands
- claims or summonses
- creditors' petitions
- wind-up applications.
Tax law administration and large business are both complex environments and as we apply tax law to complex facts, some dispute is inevitable. We want to resolve disputes directly with you as early and cooperatively as possible.
We believe in consultation, collaboration and co-design when we administer the tax system. Ongoing dialogue is essential to understanding the context behind transactions and events.
We prefer to resolve disputes early, as close to the original decisions as possible, or before they crystallise into more formal disputes - for example, our approach to large audits, starting with providing position papers to the taxpayer.
The law requires that tax liabilities are paid by the due date. If there is a dispute with us about your obligations, we will continue to seek payment. However, we may enter into a payment arrangement with you, whereby we will not take further action to collect the debt until a particular date or until the dispute reaches a particular stage. Entering into an arrangement with us will prevent further penalties for late payment being imposed, and reduces general interest charge accruing until the dispute is resolved.
If tax is owed by non-residents, we may issue a notice requiring a person who has money belonging to the non-resident to pay any tax due by that non-resident.
Alternative dispute resolution
Although we always attempt to resolve disputes directly with you and your representatives in the first instance, if a direct negotiation has not resolved the issue we will consider whether an alternative dispute resolution (ADR) process may assist. ADR can provide a cost effective, informal, consensual and speedier means of resolving disputes and litigation. It can be useful to clarify and limit the scope of a dispute, limit issues and streamline procedures. Different ADR processes may be suitable in different situations. The cost of an ADR process will usually be shared equally between us and the taxpayer.
ADR processes can:
- occur during compliance activities (for example, before the litigation stage) or during the litigation process
- involve conferencing, mediation, conciliation, neutral evaluation and case appraisal
- be used as part of a mutual agreement procedure process (in international disputes before the litigation stage).
If a dispute is in litigation, we will continually review whether an ADR process may assist in resolving some or all of the issues in dispute.
The timing of ADR can be crucial to maximise the opportunity to resolve the issue however there is no universally optimal time. Assessing when ADR may assist in resolving a dispute needs good judgment and sound understanding of all the circumstances in the case including the likelihood of achieving a result at that stage of the dispute. In large and complex cases, ADR will not normally be appropriate prior to the issue of a position paper.
ADR may not be appropriate if, for example:
- it would be in the public interest to have judicial clarification of the issues in dispute and the dispute is a suitable vehicle to test the issues
- resolution can only be achieved by departure from an established ATO view on a technical issue
- the dispute is of a kind where the state of the relationship between the parties is such that any proposed ADR is unlikely to be successful.
You have the right to object to a range of decisions, including those relating to assessments, penalties and private rulings. When we receive a written objection a review officer, independent of the original decision maker, is appointed. The process typically involves:
- gathering all relevant information relating to the original decision (for example, audit files)
- examining the grounds for objection and considering the scope of the review
- researching the issues, consulting with technical experts and any other party as necessary, noting any new information and coming to a decision
- advising you in writing about the decision reached and outlining any further rights of review or appeal.
The review officer will contact you within 14 days to acknowledge receipt of your objection and advise if we need further information.
The Taxpayers' Charter sets service standards for objections. However, if the case is particularly complex, we may negotiate a longer period with you.
You can help the process by providing all relevant documentation with your objection and responding in a timely manner if we ask for any additional information.
The Federal Court has processes designed to promote fair and efficient proceedings in the management of tax cases. We align our processes with the Federal Court, including a focus on early identification and management of disputes that cannot be resolved at the objection stage or through ADR.
A practice note was issued by the Chief Justice about the conduct of tax proceedings in the Federal Court of Australia. For more information, refer to the Federal Court of Australia.
The Code of Settlement Practice provides guidance about settling tax disputes. We may settle disputes if it is considered to be consistent with good management of the tax system.
The code outlines those circumstances under which it is generally appropriate, or inappropriate, to settle.
While we have a responsibility to collect the tax properly payable, there is also an obligation to balance this responsibility with the need for sensible administration. We may apply the 'good management rule' and settle the tax liability, considering relevant factors.
Although the power to settle tax liabilities according to the code has been delegated to a strictly limited range of senior officers, any offer made to settle a dispute should be directed through the case officer. In significant cases, internal advice is sought from senior technical experts. In addition, external legal providers may give advice to the settlement decision maker.
Settlement of a tax dispute will not prevent or prohibit any later prosecution for the same issue.
For more information including circumstances where settlements would generally be inappropriate, refer to the Code of Settlement Practice.
If you are dissatisfied with an objection decision, you generally have the right to either have the decision reviewed by the Administrative Appeals Tribunal (AAT) or appeal the decision to the Federal Court. Details of the review and appeal procedures are provided with the formal notice of Decision on Objection.
Your application must be lodged directly with either the AAT or Federal Court.
We will conduct and manage litigation in accordance with our obligations under the law, consistent with the Model Litigant Obligation, an appendix to the Legal Services Directions 2005 issued by the Attorney-General. The Legal Services Directions provide the rules under which Australian Government agencies are required to conduct litigation and outsource legal services. The obligation also binds barristers and solicitors who represent us in litigation.
Tax and super laws contain a range of offences that apply where taxpayers are believed to have not complied with their tax obligations. As for any taxpayer, large market taxpayers may be prosecuted for offences such as:
- making a false or misleading statement (which can include withholding information material to a tax matter)
- keeping incorrect or false records
- refusing or failing to provide a completed return or information, or to produce records or documents
- refusing or failing to attend before a tax officer or answer questions as and when needed
- hindering or obstructing a tax officer who is exercising the access powers.
These offences are prosecuted before a court under the authority of the Commonwealth Director of Public Prosecutions (CDPP). A small number are handled by the CDPP.
The decision to prosecute for any Commonwealth criminal offences is made according to the Commonwealth prosecution guidelines, which are matters independent of the ATO.
In prosecutions, sanctions may apply to both individuals and businesses.
Appendix 1 - The BISEP model
The extent and nature of the group's business activities and transactions
Location and size of industry
Business plans and strategies
Entity and group structure
Capital structure, financial performance and ratios
Effectiveness of controls within business systems and processes
Conditions affecting the industry - region, size and participants
Industry profit margins and cost structures
Nature of the competition
Industry skill levels
Impact of technological and business change
Industry norms and regulatory environment
Knowledge and norms of the professional or business group, for example, standard of record keeping and lodgment timeliness
Culture of the organisation and management
Business, professional networks and reputation
Approach to community and corporate citizenship
How the group deals with finances and paying tax
Linkages to control points, decision makers and advisers
Domestic, international environment and trade conditions
Key overseas developments
Government policies - interest rates, inflation, tax system and economic reforms
Management objectives and philosophy
Views and reactions of management to wider community
Approach to managing risk and drivers of the risk strategies
Attitude to and relationship with us
For large business we also consider the following factors:
Systems of compliance
Decision-making systems, processes and organisational structure
Quality assurances standards and records
The support and authority the corporate taxpayer's compliance team receives from management
The degree of ease in accessing information
Nature and purpose of transactions, that is, value, type, conduct, methods, timing, costs and benefits
Tax analysis of issues and expected range of tax results
We facilitate several forums dedicated to specific industries. Large businesses make up a substantial portion of the membership for the:
- Film Industry Partnership
- Telecommunications Industry Liaison Group
- Alcohol Corporate Consultative Forum
- Fuel Schemes Advisory Forum
- Tobacco Industry Forum
- Petroleum Corporate Consultative Forum
- Property and Development Working Group.
We also have standing liaison arrangements with the following industry associations:
- Australian Bankers Association (ABA)
- Investment and Financial Services Association (IFSA)
- Australian Financial Markets Association (AFMA)
- Minerals Council of Australia (MCA).
In some instances, such as our liaison with the ABA, we have formalised the process, including through scheduled meetings. In other instances, such as the liaison with the IFSA, there is an ongoing dialogue, with meetings scheduled as needed.
Appendix 3 - Rulings process
What we will do and what we expect from you
What we will do
During the rulings process we will maintain an open and frank dialogue with you.
Hold pre-lodgment discussions
Pre-lodgment discussions are a process intended to assist you in meeting your commercial timeframes.
In these discussions we can clarify technical issues, discuss specific transactions, information requirements, case planning and managing expectations.
We encourage you to have pre-lodgment discussions with us by contacting the large business phone service on 1300 728 060 or email LB&I Advice.
A case officer will organise a pre-lodgment meeting and ensure that the right ATO officers attend, including Law and Practice staff if an issue needs to be escalated. Before the pre-lodgment meeting, the case officer will ask you to provide an overview of the proposed transaction (including any high-level tax analysis) in order to get maximum benefit from the process.
Receive ruling applications
To apply for a ruling you should attach an application form - refer to How to apply for a private ruling.
In the application you will need to provide a full and true disclosure of the material facts such as the results of your own research and analysis.
You also need to include copies of all relevant and supporting documents including draft documents and financial statements.
To lodge a ruling application, send it to the appropriate fax number or postal address.
Understand the facts of the transaction
Our case officer will work with draft material for prospective transactions, however, the draft documentation must be materially similar to the end transaction. The case officer may also request further information and can make assumptions.
Research technical issues
In applying the tax law to the particular facts stated in your ruling application, we will have regard to the words of the Act and the history and objects of the relevant provisions as well as our own assumptions. This is referred to as the 'purposive' approach to interpreting legislation. Where the law is clear we will apply it, even if it produces inconvenient outcomes for the revenue or for taxpayers.
If the words in the Act are ambiguous or open to be interpreted in a number of ways, our approach is to adopt the interpretation that best promotes the policy intent.
There may be circumstances where the case officer will escalate an issue to our Law and Practice area, preferably before the pre-lodgment meeting. The case officer along with Law and Practice staff will review and analyse information, and may consult with relevant technical experts to formulate our position.
If an issue is escalated you will have the opportunity to discuss the matter with the officer concerned and have access to the decision maker.
What we expect from you
Contact us as early as possible about the transaction you are planning as this helps us to provide you with timely advice.
Be realistic in your timeframe expectations and understand that complex cases may take more than 28 days.
Provide us with access to a central point of contact in your organisation for the ruling application.
Provide us with reasonable access to the facilities and resources we need.
Engage in open and frank dialogue on the issues and facts to do with the application.
Determine our position
What we will do
The case officer will not generally provide pre-ruling opinions, draft private rulings or any other written expressions or written endorsements of informal assistance.
However, the case officer will maintain ongoing communication with you and provide feedback if we may rule unfavourably. If you disagree, the case officer may ask for further submissions from you to support your argument.
We will issue a draft ruling to seek consent to name parties to the transaction. That way, if you are unhappy with a draft class ruling you may wish to withdraw the ruling application.
Communicate the outcome in writing
Once we are satisfied that we understand the facts and your reasoning, we will issue the ruling. The finalised ruling is binding on us, but not the taxpayer.
What we expect from you
Take all reasonable steps to send us the information we need in a timely fashion.
Provide a full analysis of the transaction including a tax technical analysis.
Provide us with timely advice on any developments that will impact, or potentially impact, on the ruling application.
Provide a full description of the transaction, including explaining the wider context of the transaction.
For lodging by fax or post, use the appropriate fax number or postal address below:
1300 650 128
Australian Taxation Office
PO Box 3001
PENRITH NSW 2740
1300 669 846
Australian Taxation Office Superannuation business line
PO Box 3100
PENRITH NSW 2740
Large business (generally group turnover of $100 million or more) and international
1300 661 106
Australian Taxation Office
LB&I provision of advice
PO Box 377
ALBURY NSW 2640
Goods and services tax
1300 139 031
GST technical advice
Australian Taxation Office
PO Box 3524
ALBURY NSW 2640
Accounting, debt, lodgment or registration matters
1300 139 035
Operations Private Rulings Unit
PO Box 9990
ALBURY NSW 2640
Investment schemes advice
1800 033 211
Australian Taxation Office
PO Box 3546
Albury NSW 2640
We conduct several types of risk reviews to support voluntary compliance and encourage willing participation with the main review types being listed below.
Our approach and engagement is differentiated according to our assessment of your tax risk using the risk-differentiation framework (RDF).
The type of risk review we use will be influenced by your risk category. Once a review process has started you can, under certain circumstances, make a voluntary disclosure and be eligible for a reduction in penalty rates.
Pre-lodgment compliance review
This type of risk review is generally used for higher consequence taxpayers without an annual compliance arrangement (ACA) with us. This risk review supports our real-time compliance approach applied to all higher consequence taxpayers. A pre-lodgment compliance review (PCR) may also be conducted on a lower consequence taxpayer when it is considered particularly advantageous in providing upfront compliance assurance.
A PCR typically involves:
- the identification and assessment of tax risk on a periodic basis before and after lodgment - the focus is on understanding key tax decision-making that has led to positions that may present tax risks
- an effective real-time disclosure regime based on objectively sourced information and documents from you, including reliance on your own decision-making framework, policies, processes and systems - this does not prohibit the gathering or use of any other relevant information or documentation by us
- a level of intensity and differentiation commensurate with your positioning within the RDF, allowing for flexibility in the application of the risk review.
A PCR aims to ensure real-time transparency through the:
- identification, assessment and evaluation of potential areas of concern, areas of interest (for example, new business) and tax risk
- integration with other real-time compliance initiatives
- application of a differentiated and real-time compliance approach which maintains a level playing field through early engagement and fostering a culture of mutual transparency and willing participation
- building and maintaining of ongoing open and transparent dialogue.
A PCR does not provide certainty or sign off, unlike the ACA where a taxpayer can obtain both practical certainty and sign off. Although it is noted that certainty can be provided through other mechanisms such as the Rulings system.
Post-lodgment compliance reviews
These types of risk reviews are predominantly used for lower consequence taxpayers. They may also be used for higher consequence taxpayers if we need to manage a post-lodgment legacy year as part of a transition strategy into real time.
Options available for post-lodgment review include a:
- client risk review (comprehensive approach looking at the whole business)
- specific review (examining a specific issue we have identified).
Client risk review
This is a comprehensive review product we use to develop an in-depth understanding about your business operations.
A client risk review typically involves:
- collecting and analysing information to help us understand your business
- identifying tax risks
- reviewing identified risks by asking you to explain the circumstances and provide information about any mitigation strategies implemented
- assessing and evaluating identified risks
- making recommendations for future compliance activity.
The aim of a client risk review is to:
- assess identified tax risks
- get a better understanding of your business by integrating business and tax analyses
- build an understanding of your business by incorporating a review of your tax governance processes
- build and maintain an ongoing dialogue.
In this type of review we examine one or more specific risks that we have identified - as with the client risk review process. A specific review typically involves:
- collecting and analysing information to help us understand your business about the potential risks we have identified
- asking you to explain the circumstances and provide information about any mitigation strategies that have been implemented
- assessing and evaluating the identified risks.
A specific review aims to:
- minimise impact on you by concentrating only on a risk that has already been identified
- assess identified tax risks
- gain a better understanding of your business through the integration of business and tax analysis
- build and maintain an ongoing dialogue.
Appendix 5 - Pre-lodgment compliance review process
What we will do and what we expect from you
Plan and develop framework
What we will do
Our approach to working with you will be based on your willingness to be open and transparent with us.
The level of intensity will be relative to your risk category.
Our approach and intensity may alter during the PCR to reflect the level of cooperation that we experience throughout the review.
A PCR is a type of risk review which is generally used for higher consequence taxpayers and in some instances for lower consequence taxpayers.
The review is conducted in real-time. It will generally begin at the start of the new tax year and continue up to six months after lodgment of your income tax return.
We will develop and provide you with a PCR framework which documents our approach and intensity level for the PCR.
The framework will include:
- confirmation of your RDF risk category
- a detailed description of the process
- our approach to information gathering (either informal or formal)
- our approach to integrating other real-time compliance activities
- the timing and basis of communicating with you during the PCR
- the outcomes available from the PCR
- confirmation that certainty can be obtained by using our rulings processes and advanced pricing agreement program.
Communicating with you
The case officer will:
- notify you of the start of the review and discuss with you our planned PCR framework
- give you the contact details of a senior officer in case you want to raise any concerns during the review.
Review periodic disclosures
The PCR is based on effective real-time disclosures, including objectively sourced information and documents from you. This will include reliance on your own decision-making framework, policies, processes and systems.
The PCR incorporates other real-time initiatives, including the reportable tax position schedule.
We will hold internal workshops and analyse your periodic disclosures to identify areas of interest, concern and tax risk. The internal workshops may include technical, topic and industry experts to assist in identifying the need for additional information.
Communicating with you
The case officer will meet with you progressively and communicate our analysis of your periodic disclosures. We will provide a summary of our observations, areas of interest, concern and tax risks. These meetings will also provide an opportunity to discuss other relevant information.
We may request further information from you as part of our communication.
We may seek to influence your view on the application of enacted income tax law before the lodgment of your income tax return.
If you need certainty, we will assist you to obtain certainty through our rulings processes.
Tax governance processes
We will review and regularly monitor your tax governance processes to determine if they are aligned with the strategic and operational tax risk management guidelines (see Good tax governance).
Communicating our pre-lodgment findings
Just before lodgment of your income tax return, we will meet with you and confirm in writing our findings from the pre-lodgment period. If possible, we will provide you with an indicative risk category for each tax risk.
Lodging income tax returns
The case officer will discuss your lodgment obligations to ensure that you are planning to lodge your income tax returns by the due date.
Review income tax returns
We will undertake an assessment of the lodged income tax returns, including supporting schedules, relevant working papers and income tax reconciliations.
Hold an internal briefing or workshop
We will conduct internal workshops to analyse the lodged income tax return, supporting schedules, relevant working papers and income tax reconciliation to identify further areas of interest, concern and any tax risk.
The internal workshops may include technical, topic and industry experts which will also assist in identifying the need for additional information.
Communicating with you
The case officer will meet with you and communicate our analysis of the lodged income tax returns, supporting schedules, relevant working papers and income tax reconciliation.
Develop and refine risk hypothesis
Following the review of the lodged income tax return, we will finalise our assessment. This will include areas of interest, concern and any tax risk with a view to developing or refining a risk hypothesis and rating for each tax risk.
Where there are risks that are likely to need further action, we may hold additional internal workshops with technical, topic and industry experts.
The case officer may contact you if we need any further information.
We will make a recommendation on the rating of each risk and on possible future action, including whether we intend to proceed to an audit.
Senior officers will consider the recommendations. If the recommendation is to proceed to audit the case will be considered by a panel of senior officers.
Finalise the PCR
We will meet with you and, if appropriate, technical, topic and industry experts will attend to discuss the implications of our findings with you. The discussion will include possible mitigation strategies you might choose to implement, such as making a voluntary disclosure.
Finalising the PCR does not provide any form of sign off or certainty to you other than that provided through rulings processes.
Within six months of lodgment, we will send you a finalisation letter confirming any tax risks identified during the review. It will include issues that we consider appropriate to bring to your attention, as well as treatment options.
Issue feedback questionnaire
Once the review has been finalised we will send you a questionnaire seeking your feedback on the conduct of the review and any suggestions for improvements to our processes.
What we expect from you
Review the PCR framework and understand your commitments.
Raise any concerns with us at the start of the PCR about the engagement approach, intensity level or timing of planned work.
Align your tax governance processes with the guidelines, (see Good tax governance) and advise us of any changes to your tax governance processes.
Provide information in a timely way and ensure the appropriate staff are available to assist us to understand aspects of a periodic disclosure.
Advise us of any areas of concern, interest or tax risk that you have identified and how you intend to mitigate any tax risk.
Adopt an early engagement approach when using our rulings processes.
Advise us if your expected tax payable for the relevant income tax year is to vary from the amount planned.
Lodge your income tax returns by the due date.
Ensure the appropriate staff are available to answer any questions arising from our analysis of the lodged income tax returns, including the need for further information.
Consider the risks identified and implement mitigation strategies as agreed with us.
Ensure appropriate staff are available to attend the finalisation meeting.
Provide us with feedback on the conduct of the review, including any suggestions for improvement.
Appendix 6 - Post-lodgment compliance review process
What we will do and what we expect from you
Plan case and understand business
Identify and review risks
Close/escalate to audit
What we will do
During the risk review process we will maintain an open and frank dialogue with you.
Develop the risk hypothesis
We develop a risk hypothesis for all cases selected for a risk review. The hypothesis is formulated through our risk management processes, with input from the case officer and, if appropriate, relevant experts.
The risk hypothesis is shared with you at various stages of the review.
Plan the case
Case officers will:
- check whether you are involved in any other interactions with us and coordinate these if possible
- collate the information we have on your business
- develop a plan for the review and discuss this with you
- make sure the appropriate resources are available to carry out the plan
- call to advise you of the risk review, request necessary information and discuss possible interview dates
- confirm in writing any initial information requests
- discuss with you the scope of review and expected timeframes.
Gather information and build understanding of your business
Case officers, their senior officers, and, if necessary, technical, topic or industry experts will review the available information to:
- identify any additional information we need
- develop an understanding of your business activities, including your tax governance processes - this may involve discussions with key people within your business
- plan for an internal briefing or workshop.
Hold an internal briefing or workshop
The case officer will organise an internal workshop which may include technical, topic and industry experts to evolve or refine the risk hypothesis by:
- analysing available information
- analysing the industry and business environment in which you operate
- understanding your economic and tax performance
- analysing the impact of significant events.
Send an interview confirmation letter The case officer will write to you confirming any interview date and advising of any information we need before or at the interview.
Prepare for interviews
The case officer will prepare an interview questionnaire with assistance from senior officers, outlining key issues and identifying the information we need.
Interviews help us understand your business. When we hold an interview we will:
- arrange for the appropriate ATO officers to be there to address issues you may raise
- ask whether you have identified any potential risks you wish to disclose
- provide you with an opportunity to explain how you may have mitigated any potential risks
- explain our initial view on any risks
- give you the contact details of a senior officer in case you want to raise any concerns during the review.
If we can get the full facts quickly, along with the relevant supporting evidence, a decision on an appropriate outcome can be made sooner, saving all stakeholders significant resources.
Evolving the risk hypothesis
If the risk hypothesis evolves as we better understand the risk, we will notify you.
We may contact you if we need any further information.
We will assess the risks we have shared with you and those that you have disclosed and recommend whether there is any need for further compliance action.
If there are risks that are likely to need further action, the case officer may hold additional internal workshops with technical, topic and industry experts to analyse any new information.
The case officer makes recommendations on the rating of each risk and on possible future action including whether we should proceed to an audit.
The senior officer considers the recommendations. If the recommendation is to proceed to audit the case may be considered by a panel of senior officers.
Issue a risk review outcome letter
If the senior officers decide that the identified risks need further compliance action the case officer will send you a letter advising you of the risk categories and any proposed action. If there is no need for further action we will send you a finalisation letter.
We will offer you an interview to discuss the implications of our findings and the next steps. The outcome of this interview may influence our next steps.
Hold an exit interview
If you choose to have an exit interview, the case officer will organise this with you and arrange for relevant ATO officers to attend.
The case officer, senior officer, and, if appropriate, technical specialists will attend the interview to discuss the implications of our findings with you.
This discussion will cover the next steps and how we will keep you informed of our plans. We will also discuss possible mitigation strategies you might choose to implement such as making a voluntary disclosure or improving your tax risk management processes.
Send finalisation letter
After the interview the case officer will write to you outlining the final outcome from the review.
Issue feedback questionnaire
Once the case has been finalised we will send you a questionnaire seeking your feedback on the conduct of the review and any suggestions for improvements to our processes.
In some cases we will undertake an internal debriefing once the review is finalised to identify improvements.
If we have advised you that your case is going to proceed to audit we will remain in contact with you to inform you of developments.
What we expect from you
Review the risks we have identified and make a voluntary disclosure if appropriate.
Help us meet the planned timeframes for the review by:
- making relevant staff available to discuss the review
- preparing for interviews
- providing information in the agreed timeframe
- contacting your case officer with any questions.
Provide information in a timely way and ensure the appropriate staff are available for the interview.
Advise us of any potential risks you have identified and how you manage them.
Provide us with timely information and access to relevant documents and staff.
If risks are assessed or an interview occurs, provide your input about our findings.
Ensure the appropriate staff are available to attend the exit interview.
Consider the risks identified and implement management strategies if possible.
Provide us with feedback on the conduct of the review, including any suggestions for improvement.
Appendix 7 - Audit process
What we will do and what we expect from you
Plan the audit
Determine our position
Communicate and close
What we will do
Through the audit process we will maintain an open and frank dialogue with you.
Prepare the case
Our audit case officer will frame the case plan on the basis of the risk hypothesis and:
- update the information we have on your business
- review the outcomes from recent risk reviews to ensure the identified risks remain relevant
- check whether you are involved in any other interactions with us and coordinate if possible.
Prepare the audit plan
The case officer will prepare an audit plan with the help of senior officers and other compliance and technical officers. This may involve a planning workshop.
Planning for an audit includes ensuring the appropriate resources are available for its implementation.
We will endeavour to coordinate our efforts to minimise impacts upon your busiest periods.
We will regularly review and update the audit plan throughout the audit and we will inform you of progress. We will explore with you ways we might be able to speed up completion.
Notify taxpayer of audit
As we prepare our audit case and the plan, the case officer will call to tell you of our intention to audit and organise times for interviews. We will give you the names of the officers involved in the audit and the process and contact arrangements for managing the audit. We will then write to you to confirm these details and outline any initial information we need.
Hold a preliminary audit interview
At the interview we will:
- provide you with a copy of the audit plan for discussion
- discuss the audit scope, the periods under audit and the expected completion date
- discuss the information gathering processes
- discuss any guidelines relevant to the issues and years to be audited, including voluntary disclosure procedures
- outline facilities and assistance we may need
- give you the contact details of a senior officer in case you want to raise any concerns during the audit, or access key decision makers.
We will seek information from you using a range of methods including questionnaires and interviews with your key staff. This is a key phase where working closely together can help in managing the audit timeframe.
We will work with you to establish our information needs, develop good communication processes, and discuss our reasons for needing information.
We will generally request information on an informal basis. However, in some circumstances it may be necessary for us to use our formal access powers. In this case we would normally advise you beforehand and outline the process. An example of this situation may be where information you provide needs to be formally confirmed to ensure we have a full and complete view of a complex transaction or arrangement.
We will actively monitor information requests and provide you with appropriate support to ensure the request is satisfied in a timely fashion. We will take action if information requests have not been fully complied with.
We will try to coordinate our requirements to accommodate your business cycle and any important demands on your key people.
Review information and refine audit scope
The case officer will examine the information we have collected and identify the key issues, evolve or refine the risk hypothesis and develop our position.
If it is necessary to adjust the scope of the audit, the case officer will prepare a submission for consideration by senior officers. If the scope has changed we will advise you.
If needed, we will hold internal workshops with technical specialists or industry and topic experts to develop our technical position and identify any additional information requirements.
Research technical issues
The case officer or compliance team will review and analyse the information, consult with relevant technical experts and refine our position.
We will follow relevant practice statements and, if applicable, refer matters to ATO panels such as the General Anti-Avoidance Rules Panel.
Communicate our position in writing
The case officer will write to you outlining our position and invite you to respond. At this stage, as we are finalising our position, you have the opportunity to provide any further information.
Consider your response
We will consider your response to our position and any additional information you provide.
We may also meet with you to further discuss our position and any additional information. We may involve our technical specialists, industry or topic experts in these meetings.
Advise you of our final audit position
We will normally respond in writing to any matters you have raised and advise you of our final audit position. If there are multiple issues this may occur on an issue basis.
Internal position paper review
If, after considering your contentions, there remain areas of disagreement about the position paper you may request an internal review be conducted by an independent senior officer. We will inform you of the internal review criteria when we write to you with our final audit position.
Advise proposed penalty and interest charges
If we have concluded that penalties should apply we will tell you our reasons and give you an opportunity to present your views with any mitigating factors.
Communicate outcomes of each audit issue in writing
The case officer will send you a letter outlining the outcomes of the issues under audit. This will include our final position on each substantive issue including our decision and reasoning for any penalties and administrative charges.
If you make an offer to settle, the case officer and their senior officer will consider and discuss it with you, applying the Code of Settlement Practice.
If you disagree with our position, the case officer will advise you of your dispute rights and possible next steps.
Offer final interview
At the conclusion of the audit we will offer the opportunity for a final interview, which may include discussion of:
- the audit process
- expectations for our future relationship
- how your tax risk management processes may be improved
- your review rights and payment options.
Finalise the audit
Following the final interview, we will send you a finalisation letter to close the audit. We may also list any agreed measures designed to improve future compliance.
Issue feedback questionnaire
Once the case has been finalised we will send you a questionnaire seeking your feedback on the conduct of the audit and any suggestions for improvement.
What we expect from you
Work with us to set a time for the preliminary interview and ensure your key staff are available for the interview.
Provide any requested information before or at the interview.
Discuss the proposed plan with us to reach agreement on timeframes and milestones.
Provide the information we need in a timely way.
When an interview is necessary, work with us in setting interview times and make sure your key staff are available.
Provide us with reasonable access to the facilities and resources we need.
When requested confirm the accuracy of our summary of the key issues discussed and agreed undertakings resulting from our meetings.
Inform us immediately if you are having difficulty complying with an information request.
If you choose to respond to our position, to do it in a timely way and ensure that any information you provide is relevant.
If you choose to have a face-to-face discussion with us about our position, to ensure your key staff are available.
If you intend to make submissions about the remission of penalties or interest charges, to do it in a timely way.
If you choose to have an interview, to make sure your key staff are available.
Provide feedback on the conduct of the audit, including any suggestions for improvement.
Last Modified: Wednesday, 27 February 2013