Tax Governance: Justified Trust

18 December 2018

Gary Poon, Partner, Tax |

What is Justified Trust?

In 2017, the ATO adopted the Justified Trust concept from the Organisation for Economic Cooperation and Development (OECD). The goal of the Justified Trust program is to further enhance the level of confidence in taxpayers and embrace the global view that tax risk management should be a part of good corporate governance.

Who does it apply to?

The ATO has identified the Top 1,000 Taxpayers (large multinational and public companies) and Top 320 Private Group Taxpayers to participate in a four month streamlined review. As of September 2018, the ATO has completed over 200 reviews with only 31% of companies receiving a high level of assurance rating.

The review process will not stop with the Top 1,000 Taxpayers. All taxpayers should work towards implementing a strong tax governance framework which will lead to the ATO and public achieving a higher level of confidence in taxpayers’ compliance with the income tax law.

How does it work?

Reflect on your approach to tax governance.

Risk Assessment

Conduct a tax operational risk assessment to determine what risks you are facing.

Risk Management

Create a basic governance framework that outlines responsibilities & obligations of the organisation.

Risk Minimisation

Plan improvements to policies, systems, and training of staff.

What does good tax governance look like?

  1. Clear policies and process documentation
  2. Documented, periodic review of current policies and processes and their effectiveness
  3. Adequate staff training and capability
  4. Investment in systems maintenance, enhancements and upgrades
  5. Investment in tax and accounting functions.

Four focus areas of the ATO

1 2 3 4
Understanding a taxpayer’s tax governance framework Identifying tax risks flagged to market Understanding why the accounting and tax results vary Understanding significant and new transactions