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New ATO strategic approach to engagement with large companies and MNEs

Accounting, Accounting Firms, Accounting, Audit & Payroll, ATO, Audit, Audit & Payroll, Blog, Business Practices, Business Tax, Corporations, MNEs, Organisations, Tax December 10, 2018

The ATO has released details of its Action Differentiation Framework (ADF), which is its new strategic approach to engaging with large public and multinational businesses. The ATO says the Framework delivers a differentiated engagement experience based on its understanding of the complexity of the taxpayer’s affairs, informed by:

  • size;

  • transparency of its engagement with the ATO;

  • choices and behaviours evidenced in the taxpayer’s tax affairs;

  • the businesses’ risk appetite.

The ADF expands upon the ATO’s Top 100 risk categorisation approach and the ATO says it also allows it to focus on the principles of obtaining justified trust.

Under the ADF approach, a business will fall into one of the following categories based on its total business income: Category, business income and ATO engagement

Taxpayer category

Total business income

ATO engagement

Top 100

>$5 billion or Market Leader

Ongoing via Key Taxpayer engagement approach

Top 1,000

>$250 million

Ongoing via Top 1,000 Tax Performance Program

Medium

$2 million – $250 million

Periodic

Emerging

<$2 million

Periodic

The ATO says a business that falls into the Top 100 or Top 1,000 categories will receive “ongoing one-to-one tailored engagement” from the ATO.

A business that falls into the medium and emerging categories will receive broader engagement from the ATO, “like campaign and nudge communications to manage the greater numbers of [taxpayers] in these categories”. Engagement experience

The ADF approach considers the characteristics and behaviours of a business, tailoring ATO engagement regarding the services it provides, the assurance activities it undertakes and the degree of contact required. The ATO says businesses will fall into one of following taxpayer experience categories which will enable the ATO to further tailor its engagement:

  • Partner – the ATO partners with the business to maintain good compliance – “Those in the partner category are willing to engage and are transparent in maintaining compliance. [The ATO] will act in partnership to deliver services in a timely and efficient manner to help [the business] meet [its] income tax obligations. [The ATO] will also adopt a light-touch approach to maintain good compliance interactions.”

  • Encourage – the ATO encourages the business to address ATO concerns – “Those in the encourage category will be urged to address [ATO] concerns with positions relating to complex arrangements giving rise to significant tax risks. The services [the ATO offers] and approaches [the ATO takes] will be tailored to particular characteristics and behaviours and [the ATO will] work to help achieve partner status.”

  • Influence – the ATO influences the business to improve its compliance – “Those in the influence category are generally not transparent and consistently take high risk positions. [The ATO will] adopt a high-touch approach to ensure risks are addressed quickly to reduce high risk compliance interactions with [the ATO]. [The ATO will] adopt firm approaches, like formal powers for information gathering. The level of services offered to partnering [businesses] will not be available until [the ATO sees] a change fostering good compliance interactions.”


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