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10 Nov 1414 ANAO report: Annual Compliance Arrangements with Large Corporate Taxpayers

On 6 November 2014, the Australian National Audit Office released its report entitled "Annual Compliance Arrangements with Large Corporate Taxpayers ".

In para 18 of the Audit Summary, the ANAO states:

"Notwithstanding the positive experiences of participating taxpayers, take-up of ACAs has been low. In 2013–14 only 24 of the 158 potentially suitable key taxpayers (15 per cent) had an ACA, and six of these taxpayers would not be categorised as ‘key’ under the current risk assessment arrangements. As such, ACAs have not been the centrepiece of cooperative collaboration with large corporate taxpayers as envisaged when introduced, but do provide an alternative approach for large corporate taxpayers to engage with the ATO on potentially contentious tax matters. Most large corporate taxpayers are aware of ACAs as a result of the ATO’s promotional efforts but prefer to be subject to alternate compliance activities, such as pre-lodgment compliance reviews, instead of voluntarily entering into an ACA."

The Summary continues at para 19:

"Taxpayers have advised the ANAO and the ATO that the main reason for not entering into an ACA was the relatively high cost of meeting the requirements of the ACA, particularly at the entry phase. They perceived other compliance activities to have similar benefits but lower administrative demands...Although the ATO has not quantified the cost of participating in or administering an ACA, it recognises these concerns, and is looking to better tailor the intensity of its compliance activity to the assessed risk, as envisaged in its 2020 vision."

The ATO has agreed with the ANAO's two recommendations, namely:

"To better tailor ACAs to taxpayers’ assessed compliance risks, the ANAO recommends that the ATO reassesses: the design of these arrangements within the compliance framework for large corporate taxpayers; the level of compliance assurance required to provide benefits for both parties; and the administrative processes.

To support ongoing assessment of the effectiveness of ACAs to identify and mitigate tax risks in real time, the ANAO recommends that the ATO enhance its record keeping of taxpayers’ disclosures of contentious tax positions, and the strategies developed to deal with these disclosures."

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