Source:
The Top 500 private groups tax performance program seeks to give the community confidence that Australia’s largest privately owned groups are paying the right amount of tax. It is one of the programs under the Tax Avoidance Taskforce.
The program uses a one-to-one approach to collaborative engagements, with the aim to increase willing participation through a focus on prevention rather than correction.
By working together, we’re able to better understand the activities carried on by a Top 500 group and tailor their experience when they need to engage with us. This increased transparency means we can identify and resolve issues early and provide services efficiently.
Our objective is to provide a level of assurance based on the principles of justified trust and give the Top 500 group certainty around whether it is complying with its tax obligations.
If a Top 500 private group doesn’t engage with us and demonstrate they want to comply with their tax obligations, we will seek to assure the correct amount of tax has been paid through traditional review and audit action. Where applicable, we will also use our formal information gathering powers.
Who is covered by the Top 500 program
The Top 500 private groups program includes private groups:
- with over $500 million net assets, regardless of turnover
- with over $200 million turnover and over $250 million in net assets
- that are market leaders or groups of specific interest.
We use sophisticated data matching and analytic models to identify wealthy privately owned groups and link them to associated entities. We then look at the group of entities as a whole. This private group approach helps us to understand the business, which allows us to focus on the issues that are relevant and provide a more tailored experience.
For more information, see Tax performance programs for privately owned and wealthy groups.
Changes to the Top 500 program from April 2025
Groups who are no longer included in the program
Starting from April 2025, the Top 500 program:
- no longer includes private groups with over $250 million turnover, regardless of net asset value
- turnover threshold has increased from $100 million to $200 million for groups with net assets over $250 million.
Groups that were previously included in the Top 500 program will undergo an exit process after any current issues under enquiry are finalised and we have achieved a requisite level of assurance. Groups will have the option to remain in the Top 500 program where they are in justified trust or close to achieving justified trust.
New categories
We will also categorise groups in the program as either ‘significant’ or ‘general’. When full tax assurance is achieved by a group in the general category, they can benefit from a one-year monitoring and maintenance period and streamlined future engagements. We will notify groups of their categorisation after the finalisation of their current engagements.
Widening of provisional justified trust
Our provisional justified trust approach, previously only available to predominantly passive investor groups, will be widened (subject to the necessary modifications). It will include all groups that achieve full tax assurance.
We will contact you
We will contact groups impacted by these changes and advise you of the next steps.
How we tailor our approach for Top 500 groups
Our engagement approach is tailored and matched to:
- the level of complexity of the Top 500 group’s business and tax affairs
- whether the Top 500 group’s representatives are open and transparent with us
- the Top 500 group’s commitment to demonstrating a willingness to participate in the tax and superannuation systems over the long term
- the quality of tax governance that the group has in place to ensure that the correct amount of tax will be paid in the future.
By engaging directly, we build a better understanding of the group’s business, the issues that drive its success and its approach to risk. Ongoing engagement means we can track compliance from year to year and work together to prevent issues from recurring. The forward-looking aspects of our engagement approach helps the group to maintain good compliance into the future.
Our one-to-one engagements will focus on:
- assuring that the correct amount of tax has been paid in the year or years under review and will continue to be paid into the future (that is, the justified trust approach)
- identifying opportunities where we can work together to help the Top 500 group engage with the tax system
- resolving, in real time, any issues that may arise prior to lodgment.
Top 500 engagement process
A printable version is also available – Top 500 Program Client Experience Roadmap (PDF 505KB)This link will download a file.
The engagement process generally includes the following steps.
|
|
ATO issues notification letter
|
|
|
ATO calls client or their representative to arrange a meeting
|
|
|
Meeting (face-to-face, video conference, or phone)
|
|
|
ATO issues a letter explaining our approach to engagements with the Top 500 and states the agreed principles that will guide the engagement
|
|
|
One-to-one engagement interactions commence
|
|
|
ATO initiates the assurance process with a request for information (RFI) which is tailored in collaboration with the Top 500 client
|
|
|
Client sends RFI response to ATO
|
|
|
Analysis of the four key areas of justified trust:
- tax governance
- tax risks flagged to the market
- verify treatments of ongoing and atypical transactions
- alignment between accounting and tax
|
|
|
Ongoing discussion or further RFI (if required)
|
|
|
ATO issues an assurance letter providing details of assurance outcomes for entities within the group for the relevant years and next actions are detailed (where applicable)
|
|
|
Subsequent yearly engagement will be tailored based on level of assurance
|
How justified trust applies to your engagement
We use an assurance-based approach to determine whether a Top 500 group is paying the correct amount of tax by applying the justified trust methodology. The process of assurance requires that we have a thorough understanding of a Top 500 group’s income producing and wealth extraction activities.
When engaging with a Top 500 client, we review the 4 key areas that underpin the justified trust methodology.
Effective tax governance
Tax governance means having clear processes and procedures in place within a corporate governance framework to support decision-making, and to ensure that the group is meeting its taxation and superannuation obligations.
Tax governance is effective when the Top 500 group can demonstrate that the framework, processes and procedures that they have in place will result in ongoing compliance with their lodgment, reporting and payment obligations. The Top 500 tax governance area is particularly important because effective tax governance provides the foundations upon which a private group can demonstrate that they are achieving the other 3 key areas of justified trust.
Tax risks flagged to market
We flag compliance risks to the market through communications such as:
- public rulings
- taxpayer alerts
- practical compliance guidelines.
We need to:
- be satisfied that these risks are not present within the group
- ensure that the likelihood of their arising in the future is appropriately mitigated through a group’s tax governance framework.
Ongoing and atypical transactions
We must have a high degree of confidence that the tax treatment of ongoing income producing activities of a Top 500 group is correct.
Similarly, we must have a high degree of confidence that the tax treatment of any atypical transactions entered into by the group are also correct (for example, CGT consequences of asset disposals, restructures, acquisitions).
Differences in accounting and tax results
We must understand the adjustments that are included in the Top 500 group’s tax reconciliations. We need to be satisfied that the material book-to-tax adjustments are complete and correct in the context of the activities that are being carried on.
Assurance over book-to-tax requires transparency so we can verify that the adjustments to the group’s accounting treatments appropriately reflect the correct tax principles.
The process includes:
- obtaining an understanding of the accounting treatments used by each relevant entity
- conducting an in-depth reconciliation of the
- working papers supporting the tax return
- group’s accounting records (financial statements, trial balance, general ledger).
Tax assurance and justified trust
A Top 500 group can obtain holistic tax assurance and achieve justified trust where it satisfies all 4 of the key areas at a group level. Achieving justified trust will generate a tangible change in a Top 500 private group’s experience. Groups will see a reduction in the intensity of our engagement interactions and reduced compliance costs, as we move into a 3-year monitoring and maintenance period. We will also partner with the Top 500 group’s representatives to deliver timely and efficient services that will help the group meet its tax obligations.
A Top 500 group can also achieve tax assurance for some or all entities in the group where it has been determined that those entities are reporting correctly and have paid the correct amount of tax in an income year. This may be the case even though the Top 500 group has not achieved justified trust (for example, because the group does not have adequate tax governance in place to give us confidence that they will continue to report correctly, or where some entities have not yet been assured).
For some Top 500 groups, a streamlined engagement approach will be available after the group achieves full tax assurance. The categorisation of a Top 500 group as ‘significant’ or ‘general’ determines whether a streamlined approach is available following full tax assurance.
Significant and general groups categorisation
Top 500 groups have been divided into the following 2 categories:
Categorisation is based on several factors, including wealth, market leadership and specific interest groups.
Significant groups, which make up approximately one-third of Top 500 groups, have ongoing annual assurance engagements based on the key areas of justified trust. These groups have a significant impact on the tax system, which is reflected in our ongoing assurance and the standard of tax governance needed to achieve justified trust. Significant groups that achieve justified trust will benefit from a 3-year monitoring and maintenance period.
General groups, that make up the remaining two-thirds of Top 500 groups, are encouraged to achieve justified trust and benefit from a 3-year monitoring and maintenance period. In addition, general groups that achieve full tax assurance may benefit from a one-year monitoring and maintenance period, irrespective of their tax governance rating, followed by an assurance refresh engagement. The assurance refresh engagement will reconsider some tax issues previously assured. Provided no issues are identified, the group will continue with a further year of monitoring and maintenance.
We aim to provide a streamlined experience for Top 500 groups, and to continue building community confidence that Australia’s largest private groups are paying the right amount of tax.
Provisional justified trust approach
Top 500 groups that have achieved full tax assurance, but do not have the required tax governance in place to achieve justified trust, will have the opportunity to enter into provisional justified trust.
Top 500 groups will benefit from a break from assurance activities to dedicate resources toward developing an effective tax governance framework. This tax governance framework will be assessed for design effectiveness and tested for operational effectiveness before the group achieves justified trust.
For groups that predominantly generate income from passive investments, the provisional justified trust approach is further streamlined. Passive investor groups, in general, tend to treat their tax issues correctly. The provisional justified trust approach for passive investor groups only requires an assessment of the design effectiveness of their tax governance. Operational effectiveness testing is not required to achieve justified trust. We have published more information about our differentiated approach for passive investors in our Passive investor guide for Top 500 groups.
Monitoring and maintenance approach
Reaching justified trust will generate a tangible change in a Top 500 private group’s experience. There will be a consequential scale-down in engagement interactions, as we move into a 3-year justified trust monitoring and maintenance period.
During this 3-year period, we will rely on the tax governance framework operating effectively to mitigate tax risk. We will provide contemporary services and only seek to verify the treatment of new tax issues or other material changes to the group.
Top 500 groups in the general category that achieve full tax assurance can benefit from a one-year monitoring and maintenance period. This is irrespective of their tax governance rating.
For both the 3-year monitoring and maintenance period, and the one-year monitoring and maintenance period, we will conduct an annual check in. We also expect that representatives of the group will tell us in real time if the group:
- identifies tax risks that have been newly flagged to market subsist within the group
- has experienced material changes to the nature of their ongoing transactions
- enters into new or atypical transactions of a type not previously assured
- has made material changes in their approach to book-to-tax treatments
- has taken new tax positions or changed tax positions that have previously been assured
- identifies disclosure issues or errors that should be corrected.
We also expect groups in justified trust to tell us if there are any material changes to the design of its tax governance framework or changes to the management of the tax function (for example, a new CFO, tax manager, tax agent or tax partner).
After monitoring and maintenance
Justified trust refresh engagement
At the end of the 3-years of justified trust monitoring and maintenance, we will refresh our understanding and evidence base to reaffirm our confidence that the Top 500 group continues to pay the right amount of tax. We will do this by conducting a justified trust refresh engagement.
The assurance activities for the justified trust refresh engagement will resume a whole-of-business approach. They will cover all of the Top 500 group’s tax outcomes in applying the 4 key areas of justified trust. However, our assurance activities will build on the detailed understanding we already have of the group’s activities. Therefore, in ordinary circumstances we expect to leverage off:
- existing information
- the evidence we hold
- our knowledge of the group.
This will mean less resource investment by taxpayers and us.
The justified trust refresh year engagement will focus on the current income year. It will generally not involve enquiries into the years covered by monitoring and maintenance, unless key or material issues remain unassured for those years.
We will work with taxpayers on the scope and timing of the plan for their justified trust refresh engagement.
In certain circumstances, we may conduct a justified trust refresh engagement earlier than the fourth year, such as when:
- there has been a fundamental change in business (a takeover, for example) with a new business operation we need to obtain assurance over
- we have reason to consider that our justified trust should no longer be maintained.
Assurance refresh engagement
Groups in the general category that have previously achieved full tax assurance and had one year of monitoring and maintenance, will then undergo a one-year assurance refresh engagement. The assurance refresh engagement will reconsider some tax issues previously assured together with any new issues which warrant consideration.
Provided the issues under consideration are assured, and the group continues to engage with us in a timely manner, the group will continue with the streamlined approach. That is, cycling between one year of monitoring and maintenance, followed by one year of assurance refresh engagement. The assurance provided during the refresh engagement will be limited to the tax issues or transactions considered, and not provide holistic tax assurance of the Top 500 group.
What you can expect during an engagement
If you’re the controller or representative of a Top 500 private group, you can expect our engagements with you to cover your group’s tax and superannuation obligations.
We undertake an initial engagement to confirm our understanding of your business and industry and to understand your approach to managing your group’s tax obligations.
Our aim is to:
- provide a level of assurance around whether your group has been getting things right
- work with you to obtain high levels of assurance that you will report correctly in the future.
In some cases, this may involve correcting tax treatments that have been applied in prior years.
Our engagement will typically involve:
- building an understanding of your ordinary business activities and any atypical transactions that have occurred during the year
- identifying tax issues that arise from your income-generating activities and any atypical transactions that you have undertaken
- conducting an assessment of your tax governance arrangements (where applicable)
- reviewing evidence to establish whether each of the 4 areas of justified trust have been achieved.
At the end of engagement for a year, we’ll:
- outline the activities and transactions where we agree with the tax treatments that have been applied
- give specific feedback on what we have observed during the engagement. We may highlight areas for improvement and provide guidance on what your group can do to mitigate risks in the future
- outline the risks that we have identified and explain the next steps that we intend to take, where relevant.
Each year we publish our Findings report for the Top 500 program, based on our engagement with Top 500 privately owned and wealthy groups. The report:
- provides an update to the community about the work undertaken in the Top 500 program
- communicates our observations and insights from our engagements with the Top 500 population and provide our findings in the context of the 4 areas of justified trust
- highlights impediments that are preventing a significant number of Top 500 groups from achieving justified trust
- provides insights into some of the most common tax issues and risks that are present in the Top 500 population
- outline improvements and changes we are making to the program in response to
- feedback from Top 500 groups
- our own observations and insights to date
- what we have learned as the program has evolved.
View the report at Findings report Top 500 tax performance program.