Australia: ATO guidance on preparing for GST assurance reviews

Independent data testing by third-party advisors and materials on goods and services tax (GST) analytical tool

Independent data testing by third-party advisors and materials on GST analytical tool

The Australian Taxation Office (ATO) recently released a long-awaited Guide to Independent Data Testing by Third-Party Advisors to supplement existing guidance to explain how the justified trust methodology will be applied by the ATO when reviewing the existence, design and operation of goods and services tax (GST) controls as part of a taxpayer’s effective tax control framework. 

Following consultation processes that have spanned more than a year, the supplementary guide provides practical guidance specifically regarding the ATO's expectations and the conditions that must be met for a taxpayer's third-party advisor to undertake the independent data testing that can be relied upon under a GST assurance review. The intention is for ATO to apply a uniform and consistent approach to independent data testing and also to provide clarity to taxpayers about what is expected. 

  • The guide emphasises the importance of any third-party testing being adequately scoped and agreed with the ATO in advance, to determine that the testing reflects the ATO’s requirements and can be relied upon. 
  • There is specific guidance on the independence requirements for a third-party advisor.
  • The guide provides examples and additional clarity on when the requirements can or cannot be met when the third-party tester is also involved in providing compliance or advisory services to the entity being reviewed.z

KPMG observation

Based on practical experience, the third-party data testing process operates most effectively when it can be demonstrated to the ATO that there will be a collaborative and transparent process, balanced with the interests of the parties under the client-advisor relationship. Thus, it is important for there to be clear communication and realistic timeframes for the extraction, collation, and testing of the data so that it does not negatively affect the broader review process.

GST analytical tool (GAT)

In addition to the guide, the ATO released a set of “frequently asked questions” (FAQs) and examples for the completion of the GAT. 

The GAT is used by the ATO to satisfy the fourth focus area of the “justified trust” methodology—explaining variances between accounting and tax results, to provide further assurance that the taxpayer is paying the right amount of tax.  The ATO is not currently seeking to apply the GAT to taxpayers that make predominantly input taxed supplies; however, it is understood that the ATO is considering specific methodology to be applied to relevant input taxed industries.

KPMG observation

It is reported that completing the GAT is a challenging and time-consuming exercise. There are particular difficulties for taxpayers in the insurance industry and among large multinationals with complex general ledgers.  The new materials provide some further explanation of how the ATO is seeking to work collaboratively with taxpayers to address some of these challenges, how it views resulting variances and the impact the GAT will ultimately have on the overall assurance rating. 

For more information, contact a KPMG tax professional in Australia:

Roseanne Ross | +61 2 9335 8324 |

Anthony Versace | +61 3 9288 5934 |


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