Achieving justified trust and benefits for Top 500 groups
To achieve justified trust, we seek objective evidence that would lead a reasonable person to conclude that the Top 500 group paid the right amount of tax and will continue to pay the right amount of tax. This is a higher level of confidence than confirming that certain risks do not arise. We tailor our approach based on the unique business profile of a Top 500 group.
For justified trust, the Top 500 group must satisfy the following 4 key areas.
- The group has effective tax governance in place to support current and future compliance.
- Risks flagged to market in our Public Ruling and Taxpayer Alerts programs are not present in the group or are appropriately mitigated.
- Tax outcomes from both ongoing and atypical transactions are understood and agreed as correct.
- Differences in accounting and tax results are complete and can be explained in context.
Achieving justified trust is valuable for the group, and the tax system, as the group enters the 3-year monitoring and maintenance phase.
Monitoring and maintenance phase
When a Top 500 group attains an overall high assurance rating under our justified trust assurance program, we have confidence that they have complied, and will continue to comply, with income tax laws and the group is placed into justified trust.
In recognition of the high levels of trust we have in the tax outcomes reported by Top 500 groups in justified trust, we scale down our engagement interactions for the following 3 financial years. During this time, we largely rely on the effectiveness of the group’s tax governance framework to ensure correct reporting in tax returns, and that the correct amount of tax is paid.
We continue to engage with the private group during this monitoring and maintenance period through annual check-ins that are limited in scope.
Differentiated approaches to assurance and justified trust
Differentiated approaches were developed to streamline the tax assurance process and tax governance requirements for groups that have limited complexity in the tax issues that require assurance, including:
- passive investors
- High-volume trading businesses with minimal value add
- Top 500 groups with audited financial statements
Passive investors
Top 500 groups that predominantly generate income of a passive nature, generally treat the tax issues they have correctly. Our passive investor guide outlines the provisional justified trust approach which operates as a gateway to full justified trust. It gives fully assured passive investor groups a break from assurance activities to focus on developing their tax governance, without the requirement for operational effectiveness testing.
In the 2023–24 financial year, 2 passive investor Top 500 groups entered into provisional justified trust, with more expected to join provisional justified trust in 2024–25.
High-volume trading businesses with minimal value add
We have identified 61 Top 500 groups that buy and sell trading stock without adding value to the goods being sold, for example grocery and vehicle retailers. These businesses are highly systemised and generally have fewer tax issues of potential concern.
Accordingly, we have taken a differentiated approach to engaging with this group that involves streamlining assurance and tax governance requirements.
Top 500 groups with financial statements audited by an external auditor
For legal, personal and commercial reasons, many Top 500 groups have the financial statements of group entities audited by qualified external auditors.
We've simplified our assurance approach for entities within Top 500 groups that use audited financial statements to recognise these efficiencies and avoid duplication.
Figure 1: Top 500 groups' progress towards justified trust as at 30 June 2024
At the end of the 2024 financial year:
- 317 are engaging and making progress towards justified trust
- 40 are engaged but unwilling to progress towards justified trust
- 40 are not yet assessed
- 32 are in justified trust
- 4 are not engaged
- 2 are in provisional justified trust.