• How we assess risk

    We use intelligence, sophisticated data matching and analytics to detect risks, understand your circumstances and profile privately owned and wealthy groups.

    Where your dealings are transparent we can tell you what we know about you, including our view of your group's tax risk profile so you can work with us where needed to get things right.

    We use a framework to differentiate risk and tailor our engagement with you according to your risk profile and the choices and behaviours made by the group.

    On this page:

    Risk differentiation framework

    We use a framework to rank privately owned and wealthy groups according to the risk we think they pose to the tax and super systems – our risk differentiation framework.

    The risk differentiation framework is the first step in our risk-assessment process. It's based on information we hold and our understanding of your group. We use it to assess your level of tax risk, taking into account likelihood and consequences:

    • Likelihood: The propensity of a tax outcome occurring with which we do not agree. We form this assessment by considering the tax and economic performance of the group compared to similar businesses, the complexity of group structure and specific indicators of compliance risk.
    • Consequence: The potential impact of non-compliance on revenue, in influencing community engagement, our reputation and precedential outcomes of non-compliance. When considering consequence we take into account factors such as wealth, total business income and the potential quantum of tax at risk.

    The combination of likelihood and consequence informs our initial perception of risk. This perception does not assert non-compliance but may prompt our engagement with you.

    We are continuously improving this framework to maximise the effectiveness of our tailored tax assurance engagements.

    Risk differentiation framework

     A graphic representation of the preceding text. Risk is shown as increasing according to the consequence and likelihood of non-compliance.

    How we apply the risk differentiation framework

    We tailor our engagement and services with you based on our understanding of your risk position, circumstances, choices and behaviour. Initial risk categorisations are preliminary only and not definitive. Our initial risk categorisation does not assert non-compliance (or compliance). It simply indicates we may wish to ask further questions based on what we currently know.

    Lower risk

    Most privately owned and wealthy groups are assessed as lower risk. We generally accept this level of risk and reflect it in the nature of our interactions.

    Our engagement and services for lower risk groups focus on making it easy to get things right. This includes help and education initiatives, advice and guidance services and pre-lodgment support.

    Significant restructures and one-off significant transactions will still attract our attention and we may contact you prior to lodgment to provide advice so you get things right up front.

    There will be some situations where we will engage you regardless of your risk category. An example of this includes providing educational material or pursuing outstanding debts or lodgment.

    Higher risk

    Higher risk categorisation may warrant us asking further questions.

    In addition to the engagement and services provided to lower risk groups, we will provide a strong level of support and engagement to help you get things right.

    Our engagement approach will be influenced by the perceived risk. Your willingness to cooperate and engage constructively with us in mitigating the risk will influence the intensity of our approach. Our engagement approach is also influenced by the potential consequences. For example, as your risk profile moves up the consequence scale, our engagement is likely to be more intense and frequent.

    See also:

    Last modified: 02 Jun 2015QC 44838