Latest findings
The 2024 top 100 income tax and GST assurance findings report shows the:
- continued investment we make to maintain assurance over the tax affairs of our largest taxpayers
- positive impact of the justified trust program on taxpayer behaviour and compliance.
Our focus for 2024 has been building on the assurance we have already attained in our income tax program and progressing the remainder of our initial top 100 GST assurance reviews whilst applying a monitoring stance to GST reporters who have previously attained overall high and medium assurance.
Income tax
Key highlights for income tax:
- Most large business have obtained high assurance ratings
- We continue to see that most large businesses are meeting their tax obligations, with 82% of top 100 taxpayers maintaining either high or medium overall assurance ratings.
- The number of top 100 taxpayers attaining overall high assurance has increased to 59% (from 52% in 2023). The number of top 100 taxpayers that have obtained medium assurance is 23% (a reduction from 31% in 2023).
- Overall low assurance ratings have remained stable at 13%. Disputes and systemic risks continue to remain a feature of this population.
- We continue to increase our assurance over tax risks flagged to market and significant and new transactions
- New transactions or tax risks flagged to market were looked at by 83% of monitoring and maintenance reviews and 96% of refresh reviews. These figures are to be expected due to the agile and sophisticated operations of top 100 taxpayers.
- The vast majority of taxpayers have maintained their overall high assurance ratings through ongoing reviews. However, this year we have seen overall assurance ratings drop for a small number of taxpayers, including from high assurance to a lower rating. These ratings were downgraded due to material areas of assurance that were rated low or medium assurance and require further action.
- Over time we've seen a reduction in high-risk transactions being entered into. This reflects the efforts of taxpayers and the ATO to get tax outcomes right on lodgment.
- Areas of continued focus include related party financing and related party sales (including marketing or procurement hubs)
- Transfer pricing in relation to related party financing arrangements continues to be a key focus area. Reviews show 74% of arrangements reviewed now have a high or medium assurance rating which is an increase from 63% in 2022. However, related party financing arrangements continue to represent the highest proportion of assurance items attracting a red flag or low assurance rating.
- Related party sales are also a continued area of focus. Most of the offshore centralised operating models reviewed (hubs covering marketing and non-core procurement activities) attracted a high or medium assurance rating. While we have observed that over time an increasing number (about 29%) of the marketing hubs and non-core procurement transactions reviewed have resulted in improved assurance ratings, we are still working with a small number of taxpayers who have a low or red flag assurance rating in relation to offshore hubs.
- We continue to observe improvements in tax governance
- Tax governance is a critical pillar of the justified trust methodology for large public and multinational businesses. We observed a notable increase in Stage 3 ratings from 20% in 2023 to 35% in 2024. This signifies enhanced tax control frameworks that are being ‘lived in practice’ and independently verified.
GST
Key highlights for GST:
- Most large business have obtained high or medium assurance ratings
- Of the Top 100 GST reporters reviewed 93% have obtained overall high or medium assurance ratings.
- A total of 30% of Top 100 GST reporters obtained high assurance for GST (an increase from 23% in 2023) indicating that these taxpayers have paid the right amount of GST for the year reviewed. A total of 63% (a decrease from 70% in 2023) attained medium assurance.
- Overall low assurance ratings have remained stable at 2%.
- We continue to observe improvements in tax governance
- Over half of the top 100 GST reporters have obtained a Stage 2 or Stage 3 rating for tax governance. Stage 3 was achieved by 9% of GST reporters reviewed. This is important as errors due to poor governance and controls are the largest driver of amendments in the large market.
- Areas of continued focus include GST food classification, financial services and investment as well as real property, accommodation and retirement villages
- Some of the completed reviews (44%) had issues or concerns with correct reporting of GST obligations. GST corrections, including those amounts that were voluntary disclosures (VDs) processed in 2024 were typically not material in dollar terms. However, in some cases the errors were large, and in a small number of cases, penalties were applied.
- Importantly, many GST reporters have implemented, or have documented plans to implement, improvements to their controls, processes, and procedures to prevent the reoccurrence of these errors. Some taxpayers have continued to review their activity statements in relation to periods outside of the review periods to ensure compliance and to correct any GST errors identified whilst others have expanded their self-reviews to include other GST reporters in the economic group.
- We have observed key GST risks and errors in relation to GST food classification, recipient created tax invoices, financial services, and investment as well as real property, accommodation and retirement villages. These continue to be areas of focus for GST.
- We continue to see improvements in GAT ratings
- The GST Analytical Tool (GAT) is a useful tool for taxpayers to check how their various streams of economic activity are treated for GST purposes and have confidence in relation to their GST outcomes. A Stage 2 or 3 rating was attained by 86% of taxpayers who had the GAT applied.
- Taxpayers are encouraged to embed the GAT as part of their own governance processes.