15 September 2021

Recently, the Australian Tax Office (ATO) released a guide for large public and multinational companies covered by the Top 1,000 Tax Performance Program. The guide sets out the standard of information and documentation typically required for the ATO to obtain assurance that the tax affairs of the business is likely in order.

Some of the main risk areas that may attract the ATO’s attention include:

Capital allowances issues

For example:

• Insufficient supporting documentation to justify depreciation deductions claimed.

• Self-assessed effective lives that are different from those determined by the ATO.

If you have such issues, we can:

• Assist you to keep the correct documentation (e.g. fixed asset register, etc).

• Assist you to maintain a detailed analysis of the effective lives assessed.

Research & Development (R&D) issues

For example:

• Incorrectly classifying activities as R&D activities.

• Incorrectly claiming ordinary business activities expenditure as R&D expenditure and inappropriate apportionment of expenditure between eligible and non-eligible R&D activities.

• Poor corporate governance where the company tries to claim R&D offsets for activities that are not R&D activities.

If you have such issues, we can:

• Review your registered activities and the claims made for the R&D incentive.

• Distinguish ordinary business activities from your eligible R&D activities.

Tax losses

For example:

• Incomplete or insufficient documentation that continuity of ownership test (COT) or business continuity test (BCT) is satisfied.

• Long period between transfer of losses to a consolidated group and utilisation of those losses.

If you have such issues, we can analyse your data to help determine whether the COT or BCT would be satisfied.

Consolidated groups issues

For example:

• No entry allocable cost amount (ACA) and tax cost setting amount (TCSA) working papers.

• No exit ACA working papers.

• No contemporaneous valuation documentation of valuations connected with entry or exit ACAs.

• Limited documentation on restructuring of multiple entry consolidated (MEC) groups.

If you have such issues, we can assist you with all your working papers and documentation.

Valuation issues

For example:

• Missing valuation reports.

• Incorrect valuer instructions (e.g. wrong date, wrong valuation subject) and erroneous valuation assumptions.

• Inadequate documentation of valuation process.

• Incomplete valuation reports (e.g. no valuer engagement letter, valuation calculations, etc).

If you have such issues, we can assist you with providing complete valuation reports.

It’s important to review your tax affairs regularly and make a voluntary disclosure to the ATO as soon as you identify any errors, omissions or false or misleading information in tax returns or statements lodged.

A voluntary disclosure made after you have been notified that a Next Actions review or audit will commence will not lead to a reduction in penalties. However, shortfall penalties will be reduced by at least 80% if you voluntarily:

• Disclose an error or omission during your Top 1,000 review; and

• Action the recommendations from your Top 1,000 review before a Next Actions review or audit has commenced.

For a financial health check of your business or to determine whether a voluntary disclosure may be necessary, speak to your adviser or contact the Findex Tax Advisory team.