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  • How we assess tax governance for Top 500 privately owned groups

    How we rate the effectiveness of your Top 500 group's tax governance and what you can expect when you engage with us.

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    How we assess your tax governance

    Tax governance is an important focus for the Top 500 tax performance program as it is an area that must be satisfied in achieving justified trust with us.

    Demonstrating that your group has effective tax governance in place contributes to giving both you and us confidence that your group is paying the right amount of tax and will continue to do so. For Top 500 groups that wish to demonstrate that they are complying with their tax obligations, taking steps to improve tax governance provides the pathway towards achieving justified trust.

    When looking at a Top 500 group's tax governance, our focus is on the framework, processes and procedures the group uses to govern its tax and super obligations. Our focus includes evaluating the existence and design of documented procedures or written guidance available to key decision makers and employees. We also recognise that every business and private group is different, so there is no 'one size fits all' approach to how that might be done.

    To demonstrate effective tax governance, it is important you have a framework, process and procedures in place for your whole group, including for trading and non-trading entities; and over the mechanisms your group uses to extract wealth. Generally, the scope of tax governance may need to be more robust for entities that are carrying on a business due to the complexity that often arises with the conduct of commercial activities.

    Effective tax governance in the private wealth market means there are processes and procedures in place to ensure that tax risk is mitigated for both the wealth creation and wealth extraction activities that occur within your group.

    Seven principles of effective tax governance

    For Top 500 private groups, we consider how the 7 principles of effective tax governance have been applied in the context of your group.

    We consider all of the 7 principles, with an increased emphasis on the first 4.

    We want to help you ensure that the tax governance processes and procedures that you have in place are designed effectively and that they are fit for purpose. This means they are appropriate for the group's structure, size, complexity and the industry in which your group operates. We then want to assure whether those processes and procedures are operating effectively in practice.

    Where we identify areas for improvement in our effective tax governance for Top 500 private groups. We will seek to work with you to make suggestions about what your group can do to help ensure it's getting things right.

    Your tax governance rating

    We will provide you with our view of the effectiveness of your tax governance.

    Based on our discussions with you, your responses and the evidence you supply, you will be provided with an overall rating for your tax governance.

    Ratings

    Rating

    Definition

    Very high

    You provided evidence to demonstrate that a tax governance framework:

    • exists
    • has been designed effectively
    • is operating effectively in practice.

    High

    You provided evidence to demonstrate that a tax governance framework:

    • exists
    • has been designed effectively
    • is operating effectively in practice, with one or more areas of improvement.

    Medium

    You provided evidence to demonstrate that a tax governance framework:

    • exists
    • has been designed effectively, with one of more areas of improvement in both design and operational effectiveness.

    Low

    You provided evidence to demonstrate that a tax governance framework exists, with a significant number of areas requiring improvement both in terms of design and operational effectiveness.

    Very low

    You have not provided sufficient evidence to demonstrate a tax governance framework exists or we have significant concerns with your tax risk management and guidance.

    Last modified: 21 Dec 2022QC 59345