ATO Justified Trust and GST: an integrated approach

On 22 October Paul Suppree and I co-facilitated a session with the ATO at the CTA’s 2019 GST & Indirect Tax Corporate Intensive. With an attendance of c. 500 tax professionals (both in person and online), we heard from a very open and transparent ATO on how the Justified Trust activities for GST intend to be undertaken over the next four years.  

I have listed my key takeaways below with the hot topic being the methodology developed to compare GST and accounting results. Whilst the GST Analytical Tool (GAT) is a work in progress it appears to deal with a number of significant issues raised during our last presentation.

If you would like the presentation slides send me a message.

Combined (Top 100 and Top 1000)

  • Total GST Gap in FY18 for all Australian taxpayers is $5Bn (or 7.3% of estimated collections) NB this tax gap is for all taxpayers, PGI taxpayers are not delineated.

  • Context: 58.5% of net GST liabilities paid by PGI taxpayers.

  • ATO is proceeding with the alignment of client groups (i.e. income tax and GST) with a Key Client Manager (KCM) whilst maintaining GST specialisation to help streamline client engagement.

  • The GST assurance approach has the same four pillars as income tax i.e: Tax governance;tax risks flagged to market (e.g. TAs and PCGs); New or significant transactions; and Alignment between accounting and tax results (see GST analytical tool comments below)

  • Insights from pilot is that stage 1 is the most common TGF rating (Stage 1 = governance in place but not tailored or evidence of use, Stage 2 = tailored governance but no/ limited evidence of use, and Stage 3 = gold medal, tailored governance with evidence to support use.

  • The majority of taxpayers in pilot reached medium assurance.

Top 100

  • The ATO anticipates GST reviews to take c. 12 months.

  • Expecting 20 taxpayer reviews each year until 2023 with reviews to be aligned with income year as much as possible.

  • Depending on the outcome of the income tax review, the ATO will look to leverage information from the assured areas of income tax.

Top 1,000

  • Taxpayers selected on a range of factors such as GST through-put (i.e. volume of GST), significance to tax system, complexity GST adjustments, ATO’s data analytical profiling.

  • Reviews to take c. 6 months with a 4 month early notification period.

  • 1/3 of the population reviewed (2019-20 to 2023).

  • The ATO will look to leverage information from the assured areas of income tax.

GST Analytical Tool (GAT)

  • The GAT developed so GST results can be compared to accounting results.

  • Similar to tax accounting where separation of permanent adjustments from timing adjustment.

  • ATO are seeking further feedback before committing to the GAT.

  • Excludes taxpayers with predominantly input taxed supplies e.g. financial institutions. 

Thank you to the CTA for having us and thank you to Belinda Darling and Karen Price along with the ATO team that worked tirelessly behind the scenes to deliver this presentation.