New ATO guidance sets out its approach to tax controls for the collection and reporting of third-party data for large superannuation funds, managed investment trusts and insurance companies.
The Governance over Third-party Data supplementary guide has been developed in consultation with industry stakeholders including key accounting firms, superannuation funds, financial services technology providers, industry associations and other government agencies.
The ATO said this guidance supplemented the Tax Risk Management Governance and Review Guide.
“The aim is to enable entities, who rely on high volume transactional data from third party providers, to develop a strong governance framework that includes third-party data tax controls to ensure that the information being reported to investors, members and regulators is correct,” the ATO said.
“Investment industry entities should use this supplementary guide to develop and implement third party data tax controls tailored to their business.”
The ATO said the high volume of transactional data had made it increasingly difficult and onerous for tax risk management and mitigation on a transaction-by-transaction basis.
“By outsourcing to outsourced service providers, entities may leverage the expertise, control environment, scale and network benefits of such providers to reduce their tax risk and increase compliance in a cost-effective manner,” the ATO said.
“Further, these outsourced service providers themselves rely on data, systems, calculation engines and/or software of additional service providers.
“Therefore, effective tax risk management, mitigation and assurance may be obtained through the establishment and testing of controls and processes over the third-party information that feeds into the entity’s reporting obligations.”
The ATO said it expected entities to fully implement appropriate tax controls over the next 18-24 months.
“To do this, we encourage entities to document a self-assessment of their third-party data tax controls against the guide, identifying any gaps,” the ATO said.
“With this assessment, entities can then develop an implementation plan.
“In our future engagement with investment entities, we will look at the steps undertaken to design and implement these controls.”
Tony Zhang is a journalist at Accountants Daily, which is the leading source of news, strategy and educational content for professionals working in the accounting sector.
Since joining the Momentum Media team in 2020, Tony has written for a range of its publications including Lawyers Weekly, Adviser Innovation, ifa and SMSF Adviser. He has been full-time on Accountants Daily since September 2021.