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Tax control frameworks for medium and small corporations

Principles that indicate our view of better practices in relation to corporate tax governance.

Last updated 24 August 2022

We recognise that different entities may legitimately adopt different governance practices based on a range of factors, including their size, complexity, history and corporate culture. For that reason, the principles outlined in this document are not mandatory but are an indication of our view of better practices in relation to corporate tax governance.

We recommend that medium and small businesses consider adopting our better practice examples appropriate to their circumstances and the relevant requirements of the Corporations Act when assessing the robustness of their tax control and governance framework.

If you're a privately owned group, Tax governance for privately owned groups provides practical, principles-based tax governance advice tailored to your circumstances.

  • The concepts underlying control activities in medium and small entities are likely to be similar to those in larger entities but the formality with which they operate may vary. They may find that certain types of control activities are not relevant because of controls already applied by management, such as:
  • management’s sole authority for granting credit to customers and approving significant purchases can provide strong control over important account balances and transactions, lessening or removing the need for more detailed control activities
  • control activities relevant to the audit of a medium or small entity are likely to relate to the main transaction cycles such as revenues, purchases and employment expenses.

The control environment within medium or small entities is likely to differ from larger entities, in that:

  • those charged with governance in medium or small entities may not include an independent or outside member
  • the role of governance may be undertaken directly by the owner-manager where there are no other owners.
  • The nature of the control environment may also influence the significance of other controls, or their absence, such as:
  • While the active involvement of an owner-manager may mitigate certain risks arising from a lack of segregation of duties in a medium or small business, it may increase other risks, such as the risk of override of controls.
  • Audit evidence for elements of the control environment in medium or small entities may not be available in documentary form, in particular where communication between management and other personnel may be informal, yet effective; - for example, medium or small entities might not have a written code of conduct, but instead develop a culture that emphasises the importance of integrity and ethical behaviour through oral communication and by management example.