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Tax office may allow large companies to manage their own compliance Tax Office may allow large companies to manage their own compliance
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The Australian Tax Office (ATO) is considering a plan to rely on registered company auditors to check “factual matters” involving the finances of big business.The Australian Tax Office (ATO) is considering a plan to rely on registered company auditors to check “factual matters” involving the finances of big business.
The proposal aims to give some companies with a turnover of between $100m and $5bn “more choice and control over managing their compliance”, allowing the ATO to focus on higher risk matters, a spokeswoman said.The proposal aims to give some companies with a turnover of between $100m and $5bn “more choice and control over managing their compliance”, allowing the ATO to focus on higher risk matters, a spokeswoman said.
ATO documents indicate that a business may be able to use its existing auditor if the plan is adopted, but the details are still being worked out amid concerns over independence and conflicts of interest.ATO documents indicate that a business may be able to use its existing auditor if the plan is adopted, but the details are still being worked out amid concerns over independence and conflicts of interest.
In a statement issued on Thursday, the ATO said it was aware of the need to ensure independent advice and was “exploring what, if any, additional governance arrangements we might need additional to existing legal requirements for registered company auditors”.In a statement issued on Thursday, the ATO said it was aware of the need to ensure independent advice and was “exploring what, if any, additional governance arrangements we might need additional to existing legal requirements for registered company auditors”.
“Currently, where the ATO sees large claims needing some level of assurance, ATO staff would contact the taxpayer and go through a fact-checking process that requires considerable effort, and generally, where an error is identified, the taxpayer voluntarily corrects,” the spokeswoman said.“Currently, where the ATO sees large claims needing some level of assurance, ATO staff would contact the taxpayer and go through a fact-checking process that requires considerable effort, and generally, where an error is identified, the taxpayer voluntarily corrects,” the spokeswoman said.
“The aim of the proposal is to give some taxpayers with turnover between $100m and $5bn more choice and control over managing their compliance, allowing them to get on with business.”“The aim of the proposal is to give some taxpayers with turnover between $100m and $5bn more choice and control over managing their compliance, allowing them to get on with business.”
The shadow assistant treasurer, Andrew Leigh, said the ATO was valued for its independence and should be properly resourced to do the work itself.The shadow assistant treasurer, Andrew Leigh, said the ATO was valued for its independence and should be properly resourced to do the work itself.
In a statement, Leigh said: “Why should families have their tax audited by the ATO but big business are given the option of using their own accountants to sign off on their tax bills? This is likely to result in less tax revenue being collected. That means Australian families will need to pay more to make up the difference.”In a statement, Leigh said: “Why should families have their tax audited by the ATO but big business are given the option of using their own accountants to sign off on their tax bills? This is likely to result in less tax revenue being collected. That means Australian families will need to pay more to make up the difference.”
The ATO’s assistant deputy commissioner, Stuart Hamilton, told a consultation workshop that the reviewers would be able to do assurance work faster than the ATO could.The ATO’s assistant deputy commissioner, Stuart Hamilton, told a consultation workshop that the reviewers would be able to do assurance work faster than the ATO could.
“It would be basic assurance work, focusing on factual matters and where the law is clear – it will not supplant the commissioner’s determination and application of his view,” Hamilton said, according to an ATO document detailing the 19 December workshop.“It would be basic assurance work, focusing on factual matters and where the law is clear – it will not supplant the commissioner’s determination and application of his view,” Hamilton said, according to an ATO document detailing the 19 December workshop.
He said the idea, first raised two years ago, was driven by the need to free up resources for higher risk groups. It would provide the choice of using a reviewer to some taxpayers rated medium risk and with a turnover between $100m and $5bn.He said the idea, first raised two years ago, was driven by the need to free up resources for higher risk groups. It would provide the choice of using a reviewer to some taxpayers rated medium risk and with a turnover between $100m and $5bn.
“In our current thinking the taxpayer could use their existing registered company auditor,” Hamilton said.“In our current thinking the taxpayer could use their existing registered company auditor,” Hamilton said.
But Michael Martin, director of the external compliance assurance program project, acknowledged the scope and independence of the reviewers would be an area of concern.But Michael Martin, director of the external compliance assurance program project, acknowledged the scope and independence of the reviewers would be an area of concern.
The workshop document said key questions included what level of choice taxpayers would have for their provider and how the auditor’s and tax adviser’s independence would be maintained. Others related to potential conflicts of interest and the risk of auditors facing “intimidation” as they attempted to exercise professional scepticism.The workshop document said key questions included what level of choice taxpayers would have for their provider and how the auditor’s and tax adviser’s independence would be maintained. Others related to potential conflicts of interest and the risk of auditors facing “intimidation” as they attempted to exercise professional scepticism.
The workshop included accounting firms KPMG, Deloitte, PwC, Ernst & Young and Grant Thornton, as well as regulatory bodies, several law firms and senior ATO officials.The workshop included accounting firms KPMG, Deloitte, PwC, Ernst & Young and Grant Thornton, as well as regulatory bodies, several law firms and senior ATO officials.
Martin said the project was in the design phase and the concept would be developed ahead of a final decision expected about May this year.Martin said the project was in the design phase and the concept would be developed ahead of a final decision expected about May this year.
“This is all being done in the spirit of enhancing our relationship with the taxpayer community. We’d rather be using a tack hammer for a tack, rather than a sledge hammer,” Martin said.“This is all being done in the spirit of enhancing our relationship with the taxpayer community. We’d rather be using a tack hammer for a tack, rather than a sledge hammer,” Martin said.
Hamilton said the project may be “the start of something quite transformational” but it posed a question: “can we come up with a product with the right level of assurance the ATO requires and likewise that taxpayers are comfortable with?”Hamilton said the project may be “the start of something quite transformational” but it posed a question: “can we come up with a product with the right level of assurance the ATO requires and likewise that taxpayers are comfortable with?”
The ATO spokeswoman said small working groups had been formed to look at key issues raised by the workshop, such as auditor independence.The ATO spokeswoman said small working groups had been formed to look at key issues raised by the workshop, such as auditor independence.
She said the ATO would continue to refine the proposal in consultation with stakeholders, the Australian Securities and Investments Commission and the Auditing and Assurance Standards Board, with recommendations due in May.She said the ATO would continue to refine the proposal in consultation with stakeholders, the Australian Securities and Investments Commission and the Auditing and Assurance Standards Board, with recommendations due in May.
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