Late last year, the ATO released their Action Differentiation Framework (ADF), providing insight into their strategic approach to engaging with businesses.
Under the ADF, ATO engagement with taxpayers will vary based on their total business income.
Taxpayers that fall under the medium or emerging categories, those below $10 million to $250 million, can expect periodic contact with the ATO.
The Top 100 and 1,000 companies will receive either ongoing or periodic one-to-one tailored engagement.
Speaking to Accountants Daily, BDO partner Belinda Cheesewright said the level of contact would depend on a number of factors involving the taxpayer.
“We would expect that taxpayers would be more likely to be contacted if there were anomalies detected in their data-matching or in their benchmarking analysis,” said Ms Cheesewright
“The ATO has so many resources now directed at data being collected about businesses, they have access to AUSTRAC and many databases so if a taxpayer is doing the right thing and falls within all the right industry benchmarks and there is no missed income reported on their BAS or there are no discrepancies reported on any other data matching around employees, like salaries or super, you would think the Tax Office would largely not need to contact them.
“But a taxpayer who has a number of areas identified either through some employee-related data, or super guarantee, then you would expect that the periodic attention would be more frequent.”
BDO partner Gary Poon said the ATO is moving towards the OECD concept of “justified trust”, to allow it to focus its resources on the right areas.
“For example where a taxpayer can demonstrate they are good tax citizen and has a documented tax governance framework in place (as appropriate for the size and complexity of their organisation) a taxpayer is more likely to be categorised into the ‘partner’ engagement experience [by] the ATO,” said Mr Poon.
“Under the ‘partner’ experience the ATO indicates that they will adopt a ‘lighter touch’ in their compliance interactions with the taxpayer.”
To prepare for added scrutiny from the Tax Office, Ms Cheesewright believes taxpayers should be able to demonstrate their position as a “good tax citizen”.
“This may include a review of the tax positions taken and consideration of whether they have or should obtain tax advice (or a private binding ruling) in respect of any of those positions,” said Ms Cheesewright.
“They may also consider documenting their tax governance framework, as the ATO has repeatedly stated that unless the framework is documented it does not exist.”
“For most taxpayers they will naturally have some checks and balances in place which, when documented, will form part of their tax governance framework. Our advice would be to review what you have, or what you do, so when you are approached by the ATO you are able to provide evidence that you are a good tax citizen,” said Mr Poon.