ato logo
Search Suggestion:

Performance against the justified trust framework

Learn about justified trust and how the Top 500 groups performed against the 4 key areas of this tax assurance framework.

Published 20 November 2023

Achieving justified trust

The objective of a Top 500 assurance engagement is to determine, based on the 4 areas of justified trust, that the Top 500 group has paid and will continue to pay the correct amount of tax. The amount of tax a group has paid is verified as correct through the tax assurance process. Where we have evidence of effective tax governance being applied in practice, we can be confident that a Top 500 group will continue to pay the correct amount of tax. When the objective has been reached, the Top 500 group will have achieved justified trust.

To achieve justified trust, we seek objective evidence that would lead a reasonable person to conclude that the Top 500 group paid the right amount of tax and will continue to pay the right amount of tax. This is a higher level of confidence than confirming that certain risks do not arise. We tailor our approach based on the unique business profile of a Top 500 client.

To achieve justified trust, the Top 500 group must satisfy the following 4 key areas:

  • The group has effective tax governance in place to support current and future compliance.
  • Risks flagged to market in our Public Ruling and Taxpayer Alerts programs are not present in the group or are appropriately mitigated.
  • Tax outcomes from both ongoing and atypical transactions are understood and agreed as correct.
  • Differences in accounting and tax results are complete and can be explained in context.

Achieving justified trust with a Top 500 group is a valuable end state with advantages for both the group and the tax system. However, continuing to have justified trust is an outcome that is tied to a client’s ongoing willingness to participate in the tax and superannuation system and to manage potential tax risks in partnership with us.

In the longer term, our ongoing Top 500 engagements with large private groups who seek to comply with their obligations are designed to:

  • prevent disputes through early engagement on major transactions
  • build mutual trust
  • foster willing participation in the tax and superannuation systems.

Top 500 groups' progress towards justified trust as at 30 June 2023

Top 500 groups' progress towards justified trust as at 30 June 2023

At the end of the 2023 financial year:

  • 323 are engaging and making progress towards justified trust
  • 41 are engaged but unwilling to progress towards justified trust
  • 38 are not yet assessed
  • 30 are in justified trust
  • 6 are not engaged.

Under the standardised approach, 3 Top 500 groups were unable to maintain their position in justified trust after their monitor and maintenance period. However, another 3 Top 500 groups achieved justified trust.

Last year, most Top 500 groups were still experiencing challenges with satisfying all 4 key areas, particularly with tax governance. We will continue to advocate for effective tax governance within the largest private groups as we discuss further in this report.