Learn how to prepare for your next streamlined assurance review in the Next 5,000 program.
Background
A streamlined assurance review enables us to resolve issues quickly and cooperatively in a transparent way. These reviews apply the justified trust methodology to obtain assurance that your group has correctly reported and paid the right amount of tax in respect of the main trading entities including any significant transactions, events or activities within the group.
Review process
A printable version is also available – Next 5,000 Program Client Experience Roadmap (PDF, 465KB)This link will download a file
Step |
Description |
|---|---|
ATO issues notification letter |
|
ATO calls client |
|
Client receives letter of commencement no earlier than 3 months from notification (or less as agreed) |
|
Meeting (face-to-face or phone) |
|
ATO issues request for information (RFI) providing the client with 28 days to respond |
|
Phone discussion |
|
Client sends RFI response to ATO |
|
Ongoing discussion or further request for information (if required) |
|
ATO issues streamlined tax assurance report (STAR) to client |
|
Discuss next steps |
If we expect any of the steps to take longer, we will discuss this with you.
In most cases, streamlined assurance reviews will be completed within 4 months of us receiving the information we request from you in our initial RFI. We usually request information relating to the last 2 tax returns (lodged prior to the commencement of the review) and review the entities in the group with significant activities, events and transactions.
Generally, through this review process we'll:
- notify you in writing
- meet you to understand your business
- write to you to request information
- contact you to discuss next steps
We'll notify you in writing
We'll notify you in writing that we plan to start a streamlined assurance review. Commencement of any streamlined assurance review will be no earlier than 3 months from us notifying you in writing (or less as agreed).
Providing documents you should already have (for example, financial statements and tax reconciliations) to help us better understand your circumstances when we commence our review will greatly assist us.
We'll meet with you to understand your business
We'll meet with you to get a better understanding of your business and to discuss timeframes and the information we'll need from you.
We'll write to you to request information
We'll write to you setting out the information we need you to provide. The evidence we gather will help us to assure that you are correctly reporting and paying the right amount of tax in respect of the main trading entities including any significant transactions, events or activities within the group.
We'll contact you to discuss next steps
After we receive your response and consider the information you have provided, we'll contact you to discuss our analysis and next steps. We may organise a meeting to discuss areas of concern we have identified.
How the justified trust methodology is applied to your review
Justified trust is a concept from the Organisation for Economic Cooperation and Development (OECD).
In a streamlined assurance review, we apply the justified trust methodology to the significant transactions, events and activities of your group and trading entities, by reviewing the following 4 key areas of our justified trust approach. Given our scope is limited to the significant transactions, events and activities of your group, while we apply the Justified Trust methodology, we do not determine if a group has attained justified trust.
Area |
What we seek |
Details |
|---|---|---|
Governance |
We seek to understand the design of your tax governance framework, in relation to accountable management and oversight, recognising tax risks and seeking advice. The effective design of the governance framework should be 'fit for purpose' and appropriate to your group structure and tax issues, aligned with the environment it operates in. This gives us confidence that tax outcomes are being correctly reported and will continue to be. |
This includes:
|
Tax risks flagged to market |
We seek to prove that tax risks we have communicated to the market are not present. |
Tax risks flagged to market include via Practical Compliance Guidelines and Taxpayer Alerts. If a risk is identified, we seek to:
|
New and significant transactions |
We seek to understand your current business activities, particularly significant or new transactions, and the tax outcomes of these. |
This includes:
|
Book to tax |
We seek to understand the difference between business performance and tax performance. |
This includes:
|
How we assess tax governance for the Next 5,000
Effective tax governance means having clear processes and procedures to support decision making and ensure your group meets its tax and super obligations.
For Streamlined Assurance Reviews involving Next 5,000 private groups, we review the existence and design effectiveness of a groups tax governance framework with a focus of the first 3 of the 7 principles of effective governance.
The 3 principles we focus on are:
When assessing the design effectiveness of a group’s tax governance, we:
- look for documented policies and procedures that are practical and tailored to the taxpayer’s group, business, size, and industry
- focus on the design effectiveness of policies and procedures.
While we don't give governance ratings, we do:
- give opinions on the effectiveness of your policies and procedures
- suggest ways tax governance can be improved.
A private group's tax governance is effective when the processes and procedures it has in place consistently result in the correct tax outcomes and in ensuring that the private group is meeting its obligations.
Effective tax governance will help avoid common errors including:
- clerical and transposition errors
- outstanding lodgment obligations
- incorrect reporting of significant transactions
- not taking adequate steps to satisfy Division 7A.
We have generally found that issues are a result of errors that are:
- easy to correct
- easy to avoid in the future with improved governance
- not because of tax planning or avoidance.
How to prepare for a streamlined assurance review
Prepare for a review by considering the questions and documents we will typically ask for outlined in Preparing for your Next 5,000 streamlined assurance review.
This list is not exhaustive, and we may ask additional or tailored questions.
You should have many of the documents we typically request, such as:
- information used to prepare your tax return
- your company’s group structure
- tax governance documents.
Our streamlined assurance reviews generally focus on the latest 2 tax returns (lodged prior to the commencement of the review), so we're likely to request information for this time period.
Special arrangements for temporary full expensing and loss carry back claims
From 2021 onwards, the review may look at claims for temporary full expensing (TFE) and loss carry back (LCB). We may want to:
- discuss how these may affect future lodgments
- review any past TFE and LCB claims.
When reviewing TFE and LCB claims, we may request information outside of the usual 2 year period for streamlined assurance reviews.
What to expect at the end of the review
At the end of the review we do not give an overall assurance rating because of its limited scope. We will share our findings with you by:
- outlining the transactions, events and activities where we agree with the tax treatment you adopted and have tax assured
- giving specific feedback, which may highlight areas for improvement and provide guidance on what you can do to mitigate future risks
- outlining where we're unsatisfied with your risk approach and detailing the steps to mitigate these risks.
If there are no outstanding concerns, we will conclude the review. Where we do have concerns, we may:
- give you additional time to mitigate a risk or correct an error
- provide limited follow up to ensure you have taken action, or
- we may decide to further review the issue or commence an audit.
Any future reviews will only be based on:
- issues or years that have not been assured as part of the streamlined assurance review
- new information or significant changes in your tax situation.