ATO Tax Risk Guide

The Australian Tax Office (ATO) has issued comprehensive and detailed rules addressing requirements for a formal tax risk framework, from which a taxpayer’s risk will be measured. The guidance includes a tax risk management and governance review guide, in addition to appendices for control testing and directorship responsibilities. The risk guide is focused upon Board and Managerial level responsibilities. EY’s Global Alert and ATO’s tax risk guide and appendices are provided for reference:

www.ey.com/Publication/vwLUAssets/Austra...ate%20governance.pdf
www.ato.gov.au/business/large-business/i...evelresponsibilities
www.ato.gov.au/business/large-business/i...shipresponsibilities

Key actions:

Express requirements for Directors
Mandatory self-assurance processes for tax governance for which the ATO may rely in assessing risk
A lack of requisite tax controls will affect the risk rating
Board controls:
Formalized tax control framework (Tax strategy document and policies endorsed by Board of Directors)
Formalises company director roles / responsibilities for tax risk management
Formal evidence of tax risk review and familiarity with tax risk matters
Periodic internal control testing, including senior management’s attestation / formal board review of the testing results
Managerial level responsibilities:
Clearly defined and documented tax compliance and risk management roles / responsibilities
Senior management’s active role and governance with objective criteria to demonstrate Best Practices
Identification of significant transactions via a policy, process, risk rating
Ensuring data controls are in place
Record-keeping policies, including a formal tax record-retention policy
Documented internal control framework
Documented procedures explaining significant differences between accounting disclosures, financial statements and the tax return
Complete and accurate tax disclosures, including compliance risk review and tax return review
Tax governance policies addressing legal and administrative changes
Appendices
A: Testing of controls to test control design effectiveness, with a (comprehensive) example of a walk-through scenario
B: Directorship responsibilities, including a penalty regime, and an appointed public officer
The ATO has set forth new expectations and Best Practices for multinational organisations. The Board of Directors for all MNE’s, not only those operating in Australia, should review the new guidelines, as they set the standard for the future to regulate tax risk management.