Companies have been warned to check their tax risk framework to ensure they meet the requirements of the ATO’s new justified trust initiative, a move accountants are being told to take note of for their clients.
ATO to ‘beef up’ review of companies’ tax frameworks
Thomson Reuters has released a report, Technology Builds Transparency: Achieving Justified Trust, to raise awareness of the ATO’s justified trust initiative for 2017.
The justified trust initiative is the ATO’s latest approach to implementing the OECD’s Base Erosion and Profit Shifting (BEPS) program's 15 Action Items, according to Ben Scull, who is the managing director of tax and accounting, Australia and New Zealand, at Thomson Reuters,
“The justified trust initiative is really an extension of what the OECD proposed over the last couple of years about ensuring multinationals pay the correct amount of tax in the country they're operating in,” Mr Scull told Accountants Daily.
The justified trust model requires the top 1000 Australian companies to not only articulate that they’ve got a business tax risk framework, they now need to be able to demonstrate that to the ATO.
Mr Scull said that companies need to be able to show that they're following this framework through four key areas.
“One is through process, so that is making sure that you've identified the tax implication and the tax controls you have in various areas. Then there's obviously the people element to that and making sure you have the right skill set internally to manage this process,” he said.
“You then have to ensure that the data has the right level of integrity that will highlight the transactions that are impacted from the tax perspective, and you need to be able to isolate those transactions.”
He continued, “Finally there's obviously a broader technology piece about how you enable this process to come together through applying a technology solution, which will highlight and report on the relevant information that the tax office wants to understand.”
Mr Scull said that this should come as a warning to companies that they are going to come under further scrutiny by the ATO.
“What that will mean is that the ATO will be much more focused now on looking at and auditing organisations to ensure that they are justifying their position,” Mr Scull said.
“So you would have to assume that the ATO are really going to be beefing up their review of organisations, specifically the top 1000 in Australia who are more impacted by the OECD due to their revenue threshold than the others.”
Mr Scull said that there needs to be more awareness around the initiative.
“It’s happening now, and it is actually urgent, and we're seeing a lot of companies now scrambling to prepare themselves,” he said.
“I think the challenge is that the organisations are still a little bit in the dark, and it's actually been quite surprising as we talk to organisations, and they're really still unsure. And the ATO hasn't really spelt out exactly what an organisation needs to do.”