Top 100 GST assurance program

About the program

The Top 100 GST assurance program:

• seeks greater assurance that top 100 taxpayers are reporting the right amount of goods and services tax (GST)
• supports and expands on existing compliance approaches, including justified trust reviews for income tax, further enhancing confidence in these taxpayers.

Justified trust

Under the Top 100 justified trust program, GST and income tax teams work collaboratively to deliver justified trust assurance reviews across both taxes.

The extent to which the assurance reviews are integrated varies.

It depends on:

• the overall assurance rating in the most recent income tax assurance review
• whether our current engagement approach is seeking to obtain, refresh or maintain justified trust with the taxpayer.

How we tailor our approach

We gain assurance or identify areas of GST risk by engaging with the taxpayer through a 12-month GST assurance review.

We will notify the taxpayer before we commence a review and provide time for them to consider making a voluntary disclosure of any tax shortfalls.

During a review we apply our justified trust methodology and tailor our compliance activities to the taxpayer's circumstances, including:

• the overall GST performance
• the type and size of business activities
• the tax control framework for GST purposes
• our understanding from prior engagements including income tax assurance reviews.

In a GST assurance review we look for evidence that:

• GST controls within your tax control framework exist (Stage 1), are designed effectively (Stage 2), and are operating in practice (Stage 3) – this includes the design of business systems to create, capture and report transactions correctly for GST purposes
• none of the GST risks we have flagged to the market are present
• the GST outcomes of atypical, new or large transactions are appropriate
• we can understand and explain the various streams of economic activity and how they are treated for GST, which will include applying the GST analytical tool (GAT) (other than for taxpayers with predominantly input taxed supplies).

A GST assurance review will generally focus on the last complete financial year.

We also undertake data and transaction testing on 3 consecutive BAS periods within the financial year of review, to determine whether GST outcomes are appropriate.

When reviewing your tax control framework for GST purposes, we apply the GST Governance, Data Testing and Transaction Testing Guide. We consider 3 GST controls (board-level control 4, managerial control 4 and managerial control 6) to be fundamental. The design of these controls directly influences the likelihood that the right amount of GST is reported.

The fundamental controls are:

1. Periodic internal controls testing (BLC4 – see below)
2. Data controls (MLC4)
3. Your documented GST control framework (MLC6).

These controls, as well as the other 5 common controls across income tax and GST forming our areas of focus, will be reviewed.

Board-level control (BLC) 4: Periodic internal controls testing

To attain a Stage 2 rating for this control, your testing needs to be:

• documented
• approved
• independent.

For testing frequency and scope, we require a periodic (3 to 5 year) rotating testing plan. This should cover all the controls, including any common controls with income tax (BLC3, MLC 1, 3, 4, 6, 7).

These core requirements are consistent with our income tax approach.

In addition, you should provide a sufficient level of evidence about:

• who is conducting the testing (independent reviewer)
• the testing methodology (refer to section 4.3.2 of the GST Governance, Data Testing and Transaction Testing Guide for details). 

A provisional Stage 2 rating may be assigned for this control in limited circumstances. A core requirement of this control might not currently be supported by source evidence, particularly if your testing plan is still being developed and/or is yet to be approved. To be eligible for a provisional Stage 2 rating, we require a written undertaking that you will provide your finalised and approved testing plan after the completion of our GST assurance review.

Our view of a best practice (optimal) periodic controls testing program is as follows.

• MLC4 and MLC6 should be tested regularly for GST, given the importance of these controls for accurate GST reporting, and that there are 12 monthly BAS returns annually. We state in the GST Governance, Data Testing and Transaction Testing Guide that the test frequency is ideally annually, but this is not a core requirement.
• MLC4 and MLC6 to be front loaded in the testing plan (ideally within the first 2 years).
• MLC7 is a common control, but likely to require some intensity of review for GST separately to income tax. This is because the procedures to explain significant differences between accounting figures and the BAS / income tax return are designed differently and operate separately.
• The frequency is to be determined by the independent reviewer, subject to the principles set out in the GST Governance, Data Testing and Transaction Testing Guide.

Once each control has been tested, the independent reviewer should consider the following in determining the timing of re-testing:

• the outcome of that testing including the extent of any remediation action required
• changes in business/reporting/accounting systems
• significant business acquisitions/disposals
• changes in the taxpayer’s tax profile
• changes in design of governance controls or control owners.

Once it has been established that the framework is designed and operating effectively and tested successfully (that is, post the initial testing), we would expect that all controls be retested within a rolling 3 to 5 year period. Best practice is every 3 years. Where the retesting period extends beyond 5 years up to a maximum of 7 years, taxpayers can engage with us to discuss.

We would also expect controls to be retested where there have been any material changes to the controls – for example, new enterprise resource planning systems, new subsystems, or business structure changes. 

How to prepare

The GST Governance, Data Testing and Transaction Testing Guide contains detailed guidance on how the justified trust methodology is applied to help conduct a self-review of your tax control framework for GST purposes. This guidance also explains how to undertake data and transaction testing to ensure your business systems are creating, capturing and correctly reporting GST.

You should review your GST systems and records to check you have not made any mistakes before the GST assurance review and let us know if you wish to make a voluntary disclosure. You can or get more information about GST, WET, LCT and fuel tax credit voluntary disclosures.

The Guide to Independent Data Testing by Third Party Advisors is also available to help taxpayers who are considering engaging the services of a third-party advisor to undertake independent data testing for a notified Top 100 GST assurance review.

The Guide provides practical guidance on the ATO's expectations and the conditions that must be met for a taxpayer's third-party adviser to undertake the independent data testing, so that it can be relied upon in a GST assurance review.

GST analytical tool

The GST analytical Tool (GAT) is one of the tools we use to obtain greater assurance you are paying the right amount of GST.

The purpose of the GAT is to:

• understand the reasons for the key differences arising between accounting and GST figures
• to verify these differences with objective evidence if possible.

It is not intended for use by taxpayers with pre-dominantly input taxed supplies. Different analytical approaches are under consideration for those taxpayers.

The GST Analytical Tool (GAT) FAQ and Top 100 GAT example will also help you when considering the application of the GAT as part of a justified trust approach.

For a copy of the GAT Guide, and method statement we use to complete our GAT calculations, email Top100@ato.gov.au.

What to expect following a review

Following a top 100 GST assurance review we will share our findings with you, including:

• discussing the areas where we have assurance you reported the right amount of GST
• any identified GST risks.

Once you have had an initial review and obtained an overall assurance rating, you receive a tailored assurance approach that builds on the review. Find out more on Top 100 GST assurance program - Future GST engagement after initial GST assurance review.

Top 100 Findings report

Our Findings Report Top 100 Program (income tax and GST) June 2023 covers our key findings from tax assurance reviews completed to 30 June 2023.

These findings will help you understand how we apply the justified trust methodology to:

• obtain greater assurance that top 100 taxpayers are paying the right amount of income tax or GST, or
• identify areas of tax risk for further action.

More information

To learn more about the top 100 GST assurance program, email us at Top100@ato.gov.au.

We welcome feedback as we continue to integrate our approaches for justified trust across income tax and GST.

Seeks greater assurance that top 100 taxpayers are reporting the right amount of GST.