Better practice can be demonstrated by a tax strategy document prepared by management, such as a board tax policy that provides details of how the organisation identifies and manages tax risk across all taxes.

This would include policies prepared by management and endorsed by your board of directors that:

• outline the organisation's tax risk appetite
• detail an acceptable level of tax risk for day-to-day operations and what requires escalation
• are published internally and in your annual report.

Better practice can be demonstrated by:

• documented role and responsibility descriptions for company directors
• programs for inducting new directors include briefings on key accounting and tax issues so they can perform their oversight of tax risk management strategies
• ongoing support and briefings by management for directors regarding tax risk management strategies
• allocating tax risk to an appropriate and independent board sub-committee – for example, an audit committee
• clear communication of expectations for managing tax risks from the board or sub-committee to management.

A board of directors 'skills matrix' as suggested in the ASX corporate governance principlesThis link will download a file to help identify gaps in the collective skills of the board. Consideration should be given to whether it would be beneficial to include tax in the skills matrix. The ATO notes the board ‘skills matrix’ is generally tailored to each organisation's unique circumstances.

Better practice can be demonstrated by:

• board or sub-committee charters include oversight of tax risks
• regular summarised progress updates to the board or sub-committee by management on how tax issues and risks are trending (i.e. high, medium or low risk) at board meetings
• board (or sub-committee) minutes or documentation that demonstrate members have been briefed by management on the effective tax rate of the business, including whether the amount of tax paid aligns with business results and, where relevant, reasons for significant misalignment
• board (or sub-committee) endorsement for positions taken by management that fall outside published ATO safe harbours or arrangements subject to tax-payer alerts issued by the ATO
• tax-risk registers tabled by management and escalation of issues by management where appropriate – note if you have sought external advice on the relevant risk or issue
• an annual report that includes a statement from the board attesting that they have effective policies and processes in place to manage tax risk – for example, a statement prepared in accordance with the principals in the Tax Transparency Code.

Better practice example: Periodic internal control testing

Better practice can be demonstrated by:

• a testing plan prepared by management to determine the effectiveness of the control framework. (this may include a gap analysis to identify which key controls are not tested via existing assurance processes – for example internal or external audits)
• reports from independent assurance providers (internal or external) that present findings on the effectiveness of the tax control framework, whether conducted primarily for tax controls or other interdependent controls
• evidence that the board (or sub-committee) has reviewed the results presented by management of control framework testing and any proposed remediation plans to be implemented by management for tax control failures
• documented assurance (such as an attestation) from senior management concerning the capability and capacity of the tax control framework.