Annual compliance arrangements – what you need to know

Annual compliance arrangements (ACAs) are voluntary arrangements that allow us to tailor your compliance relationship with us, rather than working through traditional compliance approaches, like audits and risk reviews.

They offer you greater practical certainty, concessional treatments of penalties and interest, and strategies to mitigate tax risks before they arise. In return, you must be willing to engage with us to identify and disclose your material tax risks.

Suitability of an ACA

ACAs are most suited to public and multinational businesses we classify as ‘key taxpayers’ – most of Australia’s largest businesses fall into this category.

To get an ACA we expect a high level of assurance and cooperation from the taxpayer in all engagement activities with us.

If this is not currently the case, the ATO will work with taxpayers as part of the key taxpayer engagement to attain that high level of assurance in order to obtain (and maintain) an ACA.

Eligibility for an ACA

ACAs are offered to clients who typically exhibit the following characteristics:

• are categorised as a key taxpayer according to the risk differentiation framework (RDF)
• are willingly transparent and collaborate to resolve issues or risks
• have a trusting relationship with the ATO and a good compliance history with no or little concerns
• have robust tax corporate governance practices (aligned as appropriate with the Tax risk management and governance review guide)
• engage in rulings processes and generally follow the ATO view – if the ATO view is not followed, we would expect that the ACA client would
  • have a reasonably arguable position
  • disclose this to the ATO – see the next point
   
• adopt the ‘full and true disclosure’ approach and early engagement in regard to any potential tax risk or area where the ATO may take a different view
• lodge full and complete returns on time and willingly provide additional information
• positively influence others
• engage with the ATO to enhance the tax systems
• provide intelligence to the ATO on risks and issues
• do not engage in activities which are the subject of taxpayer alerts
• have achieved a high level of assurance under the justified trust methodology
• take up the Voluntary Tax Transparency Code.

The above list is not exhaustive. It should be noted that it is not essential that taxpayers must meet every one of these characteristics to qualify for an ACA.

Whole of tax ACA

The ATO would encourage future ACA clients to enter into a whole-of-tax ACA, for example, income tax, GST, excise, PRRT and FBT, as desirable. In these cases each tax covered would have a schedule to the main ACA detailing the relevant obligations and services.

If there are reasons why a whole-of-tax ACA is impractical, the ATO will discuss any issues with the taxpayer to determine the extent to which a whole or multi-tax ACA would be practical and desirable. For example, where a particular tax has a low level of materiality to the client or the ATO, then we may consider excluding that tax from the ACA.

For clients with an existing single tax ACA, where it is appropriate and desirable the ATO will work with the client to consider a whole-of-tax ACA.