Tax Office engaging with the top end of town

When it comes to Australia’s biggest companies meeting their tax obligations, the modus operandi of the Australian Taxation Office (ATO) has evolved well beyond the audit-based approach of the past.

Under its collaborative philosophy, the ATO recognises that getting it right is not always easy – especially for a company operating across multiple geographies and entities.

Reflecting this approach, the ATO’s tax assurance program seeks to ensure the country’s largest public and multinational companies pay the right amount of tax and have appropriate tax governance processes in place.

Companies that do the right thing attain a status known as “justified trust”. Otherwise, the ATO will be working with companies to identify areas for improvement to obtain higher levels of assurance.

Covering companies with annual turnover of $250 million-plus, the program was introduced as part of the 2016-17 federal budget, with the initial four years of funding later extended to 2022-23.

As of June 2020, the program had covered 799 entities. In 27 per cent of cases, the ATO had high assurance that the correct tax was being paid, with mid-level assurance in a further 56 per cent of cases.

Only 17 per cent of companies were classed as having ‘‘low assurance’’.

In September 2020, the ATO began notifying some of the top 1000 taxpayers included in its revised effort, known as the Combined Assurance Review (CAR) program.

Now under way, the program covers both income tax and GST obligations, with an ongoing focus on tax governance.

The overall high levels of assurance identified by the ATO do not come about by accident.

According to Wolters Kluwer’s Izzy Silva, the ATO is among the western world’s more progressive tax authorities in terms of its collaborative approach and investment in technology and data-driven risk analysis.

Wolters Kluwer’s managing director for the Asia Pacific, Silva says the big end of town has long felt under the spotlight for tax minimisation and transfer pricing practices.

The pandemic, however, has accentuated the need for companies to be good corporate citizens. This was highlighted by the decision of several large companies to return their JobKeeper subsidies after trading conditions proved better than feared.

Silva says while the private sector traditionally has led the way on technology adoption, the ATO has adeptly captured and used data to understand their ‘‘client’’ and improve these taxpayers’ interactions with the ATO.

“Companies used to say to the ATO, ‘We are unsure what you are asking for’, or ‘Our data isn’t in a format you can easily use’,” he says. “But the ATO is building a strong data culture and the agency’s commitment is demonstrated in its corporate plan.”

Silva says the taxpayer assurance program was a burden initially, with companies required to produce an “enormous amount of information” for the ATO.

Now, the program has evolved to a “monitor and maintain” phase, by which the ATO helps taxpayers monitor their compliance risks.

“The ATO’s intention to minimise the cost of compliance is heading in the right direction, although there has been some initial pain,” he says.

To achieve best practice, modern tax functions need tailored software that embeds tax reporting and compliance with an overriding governance framework.

Well known locally for its CCH products, Wolters Kluwer provides cloud subscription-based practice management software, predictive intelligence tools and information services to the tax, accounting and legal professions.

Its enterprise corporate tax platform, CCH Integrator, is used by more than 40 per cent of the 100 biggest ASX-listed companies, as well as major financial institutions and the Big Four accounting firms globally.

CCH Integrator is a specialist cloud-based tax platform that provides corporates and professional services firms with a single ‘‘look and feel’’ to manage diverse tax regimes and reporting requirements globally, as well as different languages and currencies.

As a single platform, CCH Integrator enables tax divisions to have greater control over data capture, ensuring a more standardised approach and superior tax governance and risk management standards.

Ultimately, CCH Integrator is about maximising efficiencies and minimising the stress and long hours that key tax deadlines require.

“Tax provisioning time is often a narrow window of days to a couple of weeks, with tax functions notorious for all-nighters during this peak period,” Silva says.

“CCH Integrator allows tax teams to streamline the process and devote more resources to valueadding activities, such as tax strategy.”

While CCH Integrator vies with a handful of rival products, Silva quips the main competitor is “Excel and inertia”: companies that still use spreadsheets and non-cloud mainframes.

“You would be surprised at how many multinational companies still use Excel-based processes to do their tax,” he says. “However, a clear trend shift is taking place, given the ATO’s focus on governance and assurance.”