Overview of the program
The Top 1,000 GST assurance program is ending in 2022. It is being replaced by the Top 1,000 combined (income tax and goods and services tax) assurance program.
The top 1,000 GST assurance program:
- seeks greater assurance that large public and multinational companies are reporting the right amount of GST
- supports and expands on existing compliance approaches, including justified trust reviews for income tax, further enhancing confidence in these taxpayers.
Under the program, our specialist GST teams engaged with each taxpayer using tailored compliance approaches. This was to gain greater assurance they were reporting the right amount of GST or identify areas of tax risk for further action.
How to prepare for a review
We have prepared a GST Governance, Data Testing and Transaction Testing Guide on how the justified trust methodology is applied to help conduct a self-review of your tax control framework for GST purposes. This guidance also explains how to undertake data and transaction testing to ensure your business systems are creating, capturing and correctly reporting GST.
You should review your GST systems and records to check you have not made any mistakes before the GST assurance review and let us know if you wish to make any voluntary disclosures.
The Guide to Independent Data Testing by Third Party Advisors is also available to help taxpayers that are considering engaging the services of a third-party adviser to undertake independent data testing for a Top 1000 GST assurance review.
The Guide provides practical guidance on the ATO's expectations and the conditions that must be met for a taxpayer's third-party adviser to undertake the independent data testing, so that it can be relied upon in a GST assurance review.
How we tailor our compliance approach
We gain assurance or identify areas of GST risk by engaging with the taxpayer through a 6-month GST assurance review.
We will notify the taxpayer before we commence a review and provide time for them to consider making a voluntary disclosure of any tax concerns.
During a review we apply our justified trust methodology and tailor our compliance activities to the circumstances of the taxpayer, including:
- the taxpayer’s overall GST performance
- the type and size of business activities
- GST risk management and governance
- our understanding of the taxpayer from prior engagements including income tax streamlined assurance reviews.
In a GST assurance review we seek to obtain assurance that:
- appropriate GST risk and governance frameworks exist and are applied in practice
- none of the GST risks we have flagged to the market are present
- the GST outcomes of atypical, new or large transactions are appropriate
- we can understand and explain the various streams of economic activity and how they are treated for GST, which may include applying the GST analytical tool.
A GST assurance review will focus on the last complete financial year. It will include systems and business activity statements (BAS) walk-throughs.
When reviewing your tax control framework for GST purposes, we consider three GST controls to be fundamental, as the design of these controls directly influences the likelihood that the correct amount of GST is remitted/ refunded. These three fundamental controls are:
- your periodic tax controls testing program
- data controls
- your documented GST control framework.
Data and transaction testing is also undertaken, focusing on three consecutive BAS periods, to determine whether GST outcomes are appropriate.
GST analytical tool
We have developed and tested a GST analytical tool (GAT) to help us better understand why accounting and GST results vary. The GAT is one of the tools we use to obtain greater assurance you are paying the right amount of GST. The GAT also helps us identify where we need to ask more questions.
The GAT is not intended for use by taxpayers with predominantly input taxed supplies. Different analytical approaches are under consideration for those taxpayers.
The GAT uses a standard method statement applying a 'top-down' approach to identify and understand variances between accounting figures reported in audited financial statements and GST reported on the BAS.
The method statement starts with the revenue and expenses reported in your profit and loss statement. It works through a series of adjustments to compare this information with your annualised BAS covering your financial reporting year.
We seek to understand what parts of your accounting reported revenue represent:
- taxable supplies
- GST-free supplies
- input taxed supplies
- transactions that are not supplies for GST purposes (out-of-scope supplies).
We also seek to understand what parts of your accounting reported expenses represent:
- GST-bearing expenses
- non-GST bearing expenses.
The four key steps to the GAT are:
- grouping variances
- non-GST bearing items (permanent differences)
- balance sheet and cash flow items (temporary differences)
- other adjustments (offsetting items / industry specific).
This helps us to understand variances between your financial statements and your BAS results and whether those variances are supported by appropriate evidence.
We want to work with you to understand the variances between your accounting figures and GST figures. This helps us better understand your GST profile and the key drivers of your GST outcomes. The GAT is not designed to quantify tax shortfalls or overpayments.
The GST Analytical Tool (GAT) FAQ and top 1000 GAT example may also help you when considering the application of the GAT as part of a justified trust approach. For a copy of the latest guidance and method statement we use to complete our GAT calculations, email top1000@ato.gov.au
What to expect following a review
Following a top 1,000 GST assurance review we will share our findings with you, including:
- discussing the areas where we have assurance you reported the right amount of GST
- any identified GST risks.
We may recommend specific actions to gain greater assurance in particular areas and may follow up on these recommendations.
If we identify concerns or areas of GST risk, we will work with you to gain greater assurance or address identified concerns or GST risks.
There may be circumstances where we will take a different approach, such as an audit.
You can find out what we need from you in a GST streamlined assurance review.
You can also make a voluntary disclosure or get more information about GST, WET, LCT and fuel tax credit voluntary disclosures.
For more information, see the Findings Report Top 1,000 income tax and GST assurance programs.
Assures large companies report the right amount of goods and services tax (GST).