According to Australian Taxation Office (ATO), the top 100 population consists of entities that have substantial economic activity related to Australia and form the largest contributors to corporate income tax, excise, GST, and other tax revenue sources. Consisting predominantly of public and multinational businesses and superfunds, they have a significant impact on the health of the Australian Taxation system and the ATO engages with them on a one-to one basis to help manage their compliance and assure their tax performance.
The ATO’s purpose and vision for this risk management model is for Australians to value their tax and superannuation systems as community assets, where willing participation is recognised as good citizenship. The ATO is excepting the outcome to build confidence in the aspects of Australia’s tax system through helping people understand their rights and obligations, managing non-compliance and improving ease of compliance and access to benefits.
How the ATO identify and categorise the Top 100
The ATO risk assesses each large public and multinational business at an economic group level. It includes all Australian based entities under direct or indirect Australian or foreign majority controlling interest and the businesses are initially identified based on the size of their Australian operations. Additional factors the ATO consider in identifying the top 100 is the amount of GST, income tax, or excise paid and also the influence the business may have on the market segment.
The top 100 clients are then provided a risk categorisation on income, goods and services, excise and petroleum resource rent taxes. They will receive an annual letter from the Commissioner to advise them of their risk categorisation. The letter clearly outlines the basis and categorisation for each applicable tax and how the ATO intends to engage with them over the next year and what this will mean for them.
What are the risk categories?
The ATO use three risk categories as follows:
- Key taxpayer
This taxpayer is rated at a lower risk level compared to other clients in the top 100 population, with this taxpayer having no significant history of adjustments from the ATO. However, this does not mean that they have no risks and that the ATO would not have any disputes or differences of opinion on the tax outcomes intended by law.
A key taxpayer would be proactive in advising the ATO about their issues, looking to work on possible resolutions compare to higher-risk clients. They would provide true and full disclosure of potential and significant controversial tax positions and would not seek to conceal issues. The ATO is expecting this taxpayer to engage cooperatively to seek a resolution and keep them informed with their decisions and actions. The ATO would work with them to resolve any issues and evaluate their compliance with tax law should a potential contestable mater arise.
- Key taxpayer with significant concerns
This taxpayer may have multiple identified risks and/or have economic outcomes that may not be reflected in their tax outcomes. They will have more complex risks, with larger amounts of tax at risk compare to clients with the key taxpayer category. The ATO will work closely with these clients to improve their risk categorisation and would meet to discuss a treatment plan to lower their risk rating. The ATO would expect the relationship with this taxpayer to be positive.
- Higher risk taxpayer
This taxpayer may have structural and multiple complex risks over different parts of the tax law. They would exhibit behaviours that include poor and inconsistent engagement with the ATO, failure to meet deadlines on information requests and are occasionally late with meeting their tax obligations.
This higher risk taxpayer would not tend to seek the ATO’s advice on major transactions with significant tax obligations. More often their governance of tax risk is poor and would use tax outcomes as a dominant factor in making business decisions.
The ATO would conduct comprehensive audits and other intensive risk assessment approaches and would continuously review this type of higher risk taxpayer. Also, the ATO would communicate their concerns as early as possible in an aim to identify and understand the risk. This approach allows the clients to make informed choices about their compliance approach. Should they fail to be opened and transparent, the ATO would use their formal powers in gathering information.
Source: Australia Taxation Office