ATO’s GST Assurance Reviews Extended to Top 1,000 and Top 500 Private Groups
August 2020 marks the ATO’s recommencement of its GST Assurance Reviews (GAR) program of the Top 1,000 corporates. Additionally, these extensive GST reviews have now been extended to a similar GAR program focused on the Top 500 private groups.
The ATO considers an entity’s GST business systems as one of the most significant focus areas for a GST assurance review. This is because the ATO views incorrectly reported transactions to be of significant GST revenue impact. Thus specialist GST review teams from the ATO will comprehensively review a Taxpayer’s GST governance and management, focusing on how a Taxpayer’s business systems create, capture, collate and report their GST transactions.
A GST assurance review will focus on the last complete financial year and will include systems and BAS walkthroughs. Data and transactions testing is also undertaken, focusing on a minimum of three consecutive BAS periods.
In the GARs, the ATO is seeking assurance that:
- Appropriate GST controls exist, are designed effectively;
- None of the GST risks that the ATO has flagged are present;
- The GST outcomes of abnormal, large or new transactions are appropriately treated; and
- Differences in GST and accounting figures can be explained and reconciled (ATO has developed a comprehensive GST Analytical Tool to formally assess this).
The ATO expects Taxpayers to undertake their own assurance and verification procedures on their data and transactions and Taxpayer selection for review is based on a range of risk factors including “significance to the GST system”. Given that high wealth individuals and their associated private groups are considered of significance to the tax system, there is a high possibility that individuals previously selected for “high wealth individual” reviews may be subject to a GAR.
ATO Rating on GAR
Following their comprehensive review, the ATO will give a rating to each entity reviewed ranging from a Stage 1 to Stage 3 with a “Red Flag” rating given to Taxpayers with insufficient controls or where the ATO has significant concerns with a Taxpayer’s GST compliance and/or its tax risk management and governance.
A GAR usually runs for six months where the ATO identifies mistakes and over or under payment of GST, penalties and general interest charges may be imposed, with the Taxpayer being subject to on-going governance issue if a bad ATO rating results from the GAR.
When considering eligibility for the best GAR rating of “Stage 3”, the ATO takes into account whether an independent review has tested a Taxpayer’s GST policies, procedures, controls and processes and identified gaps in these areas. Furthermore, a Taxpayers’ efforts to reduce identified gaps is also considered by the ATO in assessing a Taxpayer’s efforts to ensuring its GST data and reporting integrity.
Businesses that are not proactively preparing for a GAR may be increasing their GST risk exposure.
If you would like to discuss how MKT can assist in undertaking a GAR based on the ATO’s target areas, please contact Mimi Ngo.