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Since the late 1990s, the Australian Taxation Office’s (ATO’s) enforcement approach has been based on encouraging voluntary compliance using the ‘cooperative compliance model’. This model reflected a change in practice from deterring non-compliance primarily via enforcement strategies based on deterrence theory, such as audits and penalties, to encouraging willing compliance. One such initiative is the OECD inspired Justified Trust Program, adopted by the ATO in 2016.

The Justified Trust Program

The premise of Justified Trust is that revenue authorities and corporate taxpayers develop mutual trust through the latter supplying objective evidence to justify its tax position to the former, based on a demonstrable tax risk management and governance framework that effectively identifies and manages tax risks. Taxpayers must undergo regular detailed reviews of their tax risk management and governance framework to provide the ATO with confidence the resultant tax return is correct, and the right amount of tax is being paid at the right time. Accordingly, should a taxpayer demonstrate compliance and an effective framework, the ATO classifies them as ‘tax assured’. In return, taxpayers can expect a significant reduction in workload in future ATO reviews.

Justified Trust is a fundamental change in the way the ATO interacts with large corporates since it shifts the burden of proof regarding tax compliance. The onus is now on companies to prove the absence of significant tax risks to reduce the ATO’s reliance on audit by default. The aim is twofold; to provide the community with confidence that large corporates are paying the right amount of tax, and to better focus ATO resources to reduce the ‘tax gap’. Thus, the ATO commenced with the ‘Top 100 Program’ focused on very large public and multinational businesses with business income more than A$5 billion, and then the next ‘Top 1,000’ groups with business income between A$250 million and A$5 billion. Recently, it was extended to the ‘Top 500’ and ‘Next 5,000’ private groups.

Justified Trust reviews are incorporated into existing annual tax assurance activities for the Top 100, namely Annual Compliance Arrangements and Pre-lodgement Compliance Reviews. A Tax Assurance Report provides the overall assurance rating (Low, Medium, High) and areas for improvement. If a Top 100 taxpayer attains a high overall assurance rating, the ATO tailors its future engagement approach to be light touch under the Monitoring and Maintenance Approach for the next two income years to focus on maintaining their high level of confidence. Top 1,000 Justified Tax reviews are conducted via a four-month Streamlined Assurance Review that typically focuses on four income years. The ATO then applies a four-stage rating system to a taxpayer’s tax risk management and governance framework – Stage 1, 2, or 3 (best), Red Flag.

What is the taxpayer experience with the program?

In mid-2021, I conducted in-depth semi-structured interviews with senior tax professionals from 22 large Australian corporate taxpayers to gain insights about their Justified Trust experiences. Twelve are from ASX100 companies across a range of industries.

In terms of program classification, 12 (54.5%) interviewees are Top 100, nine (40.9%) are Top 1,000, and one is preparing for future participation. Nine participants (40.9%) have received an overall assurance of ‘High’, eight (36.4%) a ‘Medium’ rating, while two (9.1%) a ‘Low’ rating. For their tax risk management and governance framework, only two (9.1%) have achieved a Stage 3 rating, while nine (40.9%) and eight (36.4%) achieved a Stage 2 or Stage 1 rating, respectively.

Since engaging in the program, 11 interviewees (50%) revealed an increased workload, nine (40.9%) said their workload remained the same, while none revealed a decreased workload. Only five (22.7%) said the ATO was ‘more trusting and collaborative’, while two (9.1%) said it was ‘less trusting and collaborative’. Most (13 or 59.1%) believe the ATO’s level of trust and collaboration ‘remained the same’. This finding may concern non-Justified Trust taxpayers and the ATO since it undermines the program’s aims. However, given the program’s early lifecycle stage, improvement in ATO-taxpayer interactions may emerge after several iterations.

In an encouraging sign, all but one participant revealed at least one positive spillover effect from engaging in Justified Trust. The most common is ‘an increase in awareness of tax issues within the firm including the board’ (14 participants). This finding justifies criticisms levelled at directors for not being fully across tax issues at their firms. The second most cited benefit was ‘documenting policies, procedures and the tax risk governance and management framework’ (9 participants).

All participants stated they were seeking to attain Justified Trust and were not adopting a mere reactive stance. The most common reason for proactively pursuing the program is the potential ‘reputational risk’ of not receiving Justified Trust recognition from the ATO (16 participants or 72.7%). The next most common reason is to ‘obtain certainty or reduce uncertainty regarding tax positions’ (8 participants).

Most interviewees (15 or 68.2%) said their firm’s approach to tax risk is ‘conservative’ or ‘very conservative’ (3 or 13.6%). None rated their firm’s approach as ‘aggressive’ although two claimed their approach is ‘conservative to moderate’ and another two rated their approach as ‘moderate’. All 22 interviewees responded that their firm’s tax risk appetite had not changed in response to Justified Trust.

Interestingly, all participants responded that changes implemented by them to attain recognition (if any) had not resulted in a significant change to their organisation’s ultimate tax liability. That is, despite the significant efforts and resources invested to improve tax risk management and governance frameworks, firms did not experience any change to their tax liability. This questions the efficacy of Justified Trust given its aim to reduce the large corporate tax gap.

16 interviewees (72.7%) said their ATO relationship was unchanged since the program while three (one) revealed their ATO relationship was better (worse). A common criticism levelled at the ATO was that their expectations are unrealistic. Other criticisms included the ATO is under-resourced (for example, the program’s field teams are inexperienced and inefficient) and adopts an uncommercial approach to reviews.

Most (19 or 86.4%) believed the recent criticism of boards regarding their engagement with tax matters is unfair while three believed it is reasonable. The majority maintain boards take an active interest in tax positions and tax governance and accordingly, criticism they are ‘ignorant’ of their firms’ tax arrangements is unwarranted.

Of the 20 interviewees who have yet to receive a tax risk governance and management framework Stage 3 rating, only six (27.3%) revealed they are aiming to achieve that rating, while two are not aiming for it, and seven are unsure of their intentions. This may be of concern to the ATO since it may undermine the program’s aims.

Many firms made significant operational and/or organisational changes to achieve Justified Trust. Eleven (50.0%) revealed they engaged external advisers to assist with review preparation or respond to ATO information requests, while nine (40.9%) invested in development of new processes or internal controls. Eight participants (36.4%) employed additional staff to assist with Justified Trust engagement. It was clear that Top 100 taxpayers are better resourced to address all program elements relative to Top 1,000 taxpayers.

Overall, interviewees generally support Justified Trust and intimated that additional benefits are expected to accrue in the fullness of time. Although, some strong dissenting voices implied the ATO has extended its reach with the program.


A common theme is that most taxpayers need to commit significant resources such as people, time, and money to effectively engage in Justified Trust. The challenge for smaller taxpayers is the commercial decision regarding the investment required to ensure a reasonable balance between meeting the ATO’s onerous expectations and the benefits of attaining high assurance. The results provide valuable feedback to the ATO on practical implementation issues experienced by taxpayers and may inform the conduct of future reviews especially if the ATO wishes to engender confidence in taxpayers that potential program benefits outweigh costs.


This article has 1 comment

  1. I suspect I am not the only lawyer who has lost trust in the competence, integrity and ethics of the Australian Taxation Office after seeing how taxpayers are dealt with these days. They used to be a lot better years ago and applied the law in a detached objective way instead of abusing power to conduct legalised extortion..

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