About the program
The Top 100 GST assurance program:
- seeks greater assurance that top 100 taxpayers are reporting the right amount of goods and services tax (GST)
- supports and expands on existing compliance approaches, including justified trust reviews for income tax, further enhancing confidence in these taxpayers.
How we tailor our approach
We complete an initial top 100 GST assurance review (initial review) for each top 100 taxpayer. We then continue annual reviews until you attain overall high or medium assurance.
Once you have attained an overall medium or high level of assurance in a top 100 GST assurance review, we:
- review you on a periodic basis at least once every 4 years (refresh review)
- take a monitoring stance during the intervening 3 years
- may also conduct targeted assurance activities during the intervening 3 years.
We gain or refresh assurance or identify areas of GST risk by engaging with you through a 12-month GST assurance initial or refresh review.
We will:
- notify you before we start a review
- give you time to consider making a voluntary disclosure of any tax shortfalls.
During a review we apply our justified trust methodology and tailor our compliance activities to your circumstances. These include:
- the overall GST performance
- the type and size of business activities
- the tax control framework for GST purposes
- our understanding from prior engagements including income tax assurance reviews.
In a GST assurance review, we review 4 focus areas and look for evidence that:
- GST controls within your tax control framework (including the design of business systems to create, capture and report transactions correctly for GST purposes
- exist (Stage 1)
- are designed effectively (Stage 2)
- are operating in practice (Stage 3)
- none of the GST risks we have flagged to the market are present
- the GST outcomes are correctly reported and 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 will include applying the GST Analytical Tool (GAT) (unless you are a taxpayer with predominantly input taxed supplies).
A GST assurance review will generally focus on the last complete financial year.
In an initial review, we undertake data and transaction testing. The testing is on 3 consecutive BAS periods within the financial year of review. This is to determine whether GST outcomes are appropriate.
We will take a tailored approach to GST data and transaction testing in the refresh review. The intensity of data and transaction testing we do will be informed by our comprehensive understanding of you across all 4 focus areas.
When reviewing your tax control framework for GST purposes, we apply the GST Governance, Data Testing and Transaction Testing Guide. We consider 3 GST controls (board-level control 4, managerial control 4 and managerial control 6) to be fundamental. The design of these controls directly influences the likelihood that the right amount of GST is reported.
The fundamental controls are:
- Periodic internal controls testing (BLC4)
- Data controls (MLC4)
- Documented GST control framework (MLC6).
We will review these controls, as well as the other 5 common controls, across income tax and GST – BLC1, BLC3, MLC1, MLC3 and MLC7.
Board-level control (BLC) 4: Periodic internal controls testing
To attain a Stage 2 rating for this control, your testing needs to be:
- documented
- approved
- independent.
For testing frequency and scope, we need a periodic (3 to 5 year) rotating testing plan. This should cover all the controls. These include any common controls with income tax (BLC3, MLC 1, 3, 4, 6, 7). These core requirements are consistent with our income tax approach.
In addition, you should give a sufficient level of evidence about:
- who is conducting the testing (an independent reviewer and not the control owner)
- the testing methodology (refer to section 4.3.2 of the GST Governance, Data Testing and Transaction Testing Guide for details).
We may assign a provisional Stage 2 rating for this control in limited circumstances. A core requirement of this control might not currently be supported by source evidence. This is particularly if your testing plan is still being developed or is yet to be approved.
To be eligible for a provisional Stage 2 rating, we need a written undertaking. This undertaking is that you will give us your finalised and approved testing plan after the completion of our GST assurance review.
Best practice periodic controls testing program
Our view of a best practice (optimal) periodic controls testing program is as follows.
MLC4 and MLC6
MLC4 and MLC6 should be tested regularly for GST, given:
- the importance of these controls for accurate GST reporting
- there are 12 monthly BAS returns annually.
We state in the GST Governance, Data Testing and Transaction Testing Guide that the test frequency is ideally annually, but this isn't a core requirement.
MLC4 and MLC6 are to be front loaded in the testing plan (ideally within the first 2 years).
MLC7
MLC7 is a common control, but likely to require some intensity of review for GST separately to income tax. This is because the procedures to explain significant differences between accounting figures and the BAS / income tax return are designed differently and operate separately.
Frequency
The frequency is to be determined by the independent reviewer, subject to the principles set out in the GST Governance, Data Testing and Transaction Testing Guide.
After first testing
Once each control has been tested, the independent reviewer should consider the following in determining the timing of re-testing:
- the outcome of that testing including the extent of any remediation action required
- changes in business, reporting or accounting systems
- significant business acquisitions or disposals
- changes in your GST profile
- changes in design of governance controls or control owners.
It needs to be established that the framework is designed and operating effectively and tested successfully (that is, post the initial testing). After that, we would expect that all controls be retested within a rolling 3 to 5 year period. Best practice is every 3 years.
If the retesting period extends beyond 5 years up to a maximum of 7 years, you can engage with us to discuss.
We would also expect controls to be retested where there have been any material changes to the controls. Examples are:
- new enterprise resource planning systems
- new subsystems
- business structure changes.
How to prepare
Information available
Engaging early with you includes information on:
- what to expect in a GST assurance review
- our expectations around pre-lodgment disclosures.
The GST Governance, Data Testing and Transaction Testing Guide contains detailed guidance on how the justified trust methodology is applied. It explains how:
- the justified trust methodology helps conduct a self-review of your tax control framework for GST purposes before the start of an initial or refresh review
- to undertake data and transaction testing to ensure your business systems are creating, capturing and correctly reporting GST.
Check your systems and records
Review your GST systems and records to check you haven't made any mistakes before the GST assurance review.
Let us know if you wish to make a voluntary disclosure. You can or get more information about GST, WET, LCT and fuel tax credit voluntary disclosures.
Using a third party adviser
You may be considering engaging the services of a third-party adviser to undertake independent data testing for a notified top 100 GST assurance review.
If so, our Guide to Independent Data Testing by Third Party Advisors is available to help. This guide gives practical guidance on:
- our expectations
- the conditions that the third-party adviser must meet to undertake the independent data testing.
This is so we can rely on the independent data testing in a GST assurance review.
GST analytical tool
The GST analytical tool (GAT) is one of the tools we use to have greater assurance you are paying the right amount of GST.
The purpose of the GAT is to:
- understand the reasons for the key differences arising between accounting and GST figures
- verify these differences with objective evidence if possible.
It isn't intended for use if you are a taxpayer with pre-dominantly input taxed supplies.
The GST analytical tool FAQ and Top 100 GAT example will help you when considering the application of the GAT as part of a justified trust approach.
For a copy of the GAT Guide and method statement we use to complete our GAT calculations, email Top100@ato.gov.au.
What to expect following a review
At the conclusion of a top 100 GST assurance review, we will share our findings with you in a GST Assurance Report. This includes discussing:
- the areas where we have assurance you reported the right amount of GST
- any identified GST risks.
Once you have had an initial review or refresh review and have an overall assurance rating, you receive a tailored assurance approach that builds on the review. See, Top 100 GST Program Future GST engagement after initial GST assurance review.
Top 100 Findings report
Our Findings report – Top 100 income tax and GST assurance programs covers our key findings from tax assurance reviews completed to 30 June 2024.
These findings will help you understand how we apply the justified trust methodology to either:
- obtain greater assurance that top 100 taxpayers are paying the right amount of income tax or GST
- identify areas of tax risk for further action.
More information
For more information about the top 100 GST assurance program, email Top100@ato.gov.au.