The ATO’s GST assurance reviews are in full swing, with the Top 100, 1,000, 5,000 and other risk reviews well underway and the ATO providing much-needed guidance on the nature and approach of their reviews.
Despite this, we often get asked by clients about the key controls or areas the ATO focuses on when applying its justified trust methodology. Thankfully, the answer can be found in the ATO’s GST Governance, Data Testing and Transaction Testing guide.
However, rather than trawling through the guide, we’ve summarised the key GST controls the ATO focuses on and why.
The Tax Control Framework
In undertaking its assurance reviews across both income tax and GST, the ATO considers a taxpayer’s approach to tax under the following objectives and controls.
When conducting its reviews, the ATO will often consider both income tax and GST under BLC1, BLC3, MLC1, MLC3 and MLC7.
However, when reviewing GST specifically, significant weighting is applied towards the BLC4, MLC4 & MLC6 controls. These controls focus on the existence, design and operation of the GST controls the taxpayer has in place.
In reviewing these three controls, the ATO can holistically gauge the effectiveness of a taxpayer’s GST processes and procedures.
These controls focus on the existence, design and operation of GST controls the taxpayer has in place.
MLC4: Controls in place for data for GST purposes
The purpose of this control is to ensure that GST controls are in place to ensure GST data integrity. This control is focused on the configuration of GST in the taxpayer’s accounting systems and/or sub-systems, to the extent such systems are used in the collation and reporting of GST to the ATO. To test such controls, a review is often conducted on the taxpayer’s accounting systems’ master data (i.e. customer master, vendor master and product master databases).
BLC4: Periodic controls testing program
A testing program sets out how you, the taxpayer, ensure your GST controls are operating as intended. The testing program can be created in consultation with the ATO or an independent third party and conducted by that third party. The ATO will not often conduct the testing required to assess the operational effectiveness of tax controls. Rather they rely on the testing program to get comfort that the risk of GST misstatement is being tested effectively.
MLC6: Documented GST control frameworks
This control relates to the indirect tax documentation that outlines the taxpayer’s GST compliance processes and procedures, including the preparation, review and lodgement of its BAS. Such documentation may be incorporated into a GST manual or broader tax risk management and governance documents.
How BTG can help?
Our recovery and assurance services cover all of the above three controls and more. From undertaking data integrity reviews, to reviewing or preparing indirect tax documentation and training, our staff have decades of experience that you can benefit from today.
1In undertaking it’s assurance reviews across income tax and GST, the ATO considers a taxpayer’s approach to certain objectives and controls.
2 When reviewing GST specifically, significant weighting is applied towards BLC4, MLC4 and MLC6 controls.
3 To test BLC4, independent third parties like BTG can be engaged to undertake detailed data testing.
