How we build and maintain community confidence taxpayers are paying the right amount of tax.
Justified trust is a concept from the Organisation for Economic Cooperation and Development (OECD).
Justified trust builds and maintains community confidence that taxpayers are paying the right amount of tax. It also allows us to focus our resources in the right areas.
To achieve justified trust, we seek objective evidence that would lead a reasonable person to conclude a particular taxpayer paid the right amount of tax. This is a higher level of assurance than confirming certain risks do not arise.
We tailor our assurance approach based on the unique business profile of a taxpayer.
When engaging with a taxpayer, we review the following four key areas:
- Understanding a taxpayer's tax governance framework
- Identifying tax risks flagged to the market
- Understanding significant and new transactions
- Understanding why the accounting and tax results vary
We confirm the existence, application and testing of a tax risk management and governance framework.
We recognise entities use different governance practices based on a range of factors.
We review risks or concerns we communicated to the market (for example, through Taxpayer alerts, Practical compliance guidelines, or Public rulings). We then determine whether these may be present.
We seek to understand current business activities, particularly significant or new transactions, and the tax outcomes.
We analyse the various streams of economic activity and how they are treated for taxation and excise purposes.
This requires a holistic understanding of the taxpayer's business operations and financial performance. We compare this to its tax performance.
For example, we analyse:
- the Effective tax borne (ETB) and global value chain to understand why accounting and income tax results vary
- sales, acquisitions and other data and compare this to net goods and services tax (GST) paid.
For a copy of the ETB Guide and workbook we use to complete our ETB calculations, email Top100@ato.gov.au
The GST analytical tool (GAT) is one of the tools we use to obtain greater assurance you are paying the right amount of GST and to help us better understand why accounting and GST results vary. It is not intended for use by taxpayers with pre-dominantly input taxed supplies. Different analytical approaches are under consideration for those taxpayers.
Justified trust gives the community confidence that large businesses are paying the right amount of tax. This fosters broader willing participation and engagement across the tax and superannuation system.
Our approach helps us focus how we minimise the income tax and GST tax gaps through:
- our engagement strategy (for example, identifying and resolving areas of concern at the earliest possible time)
- active compliance (for example, audit cases)
- active prevention across the market (for example, through Taxpayer alerts, Practical compliance guidelines, or Public rulings).
- OECD: Measures of Tax Compliance Outcomes – A Practical GuideExternal Link
- Tax risk management and governance review guide (for large public and multinational businesses)
- GST Governance, Data Testing and Transaction Testing Guide
- Guide to Independent Data Testing by Third Party Advisors
- Reviewing tax governance for large public and multinational businesses
- Tax governance for privately owned groups