The Australian Taxation Office has noticeably increased its efforts within the past year to conduct integrity of business systems reviews through E-audits for taxpayers across Australia. The audit objective is to identify risks, irregularities, systematic errors and possible weaknesses in system controls and the big data of taxpayer’s electronic accounting systems. Based on the ATO’s investment in information technology upgrades and computer assisted verification (CAV) specialists, companies doing business in Australia are encouraged to conduct an internal assessment of its accounting systems and processes to eliminate the element of surprise for audit liabilities that may be identified by a future ATO E-audit.

1. July 2015
As enterprises grow and diversify, there comes an
increased burden of managing accurate information input
and outputs that drive embedded GST determinations
within the accounting system. Understandably, the
integrity of information systems used to support the
business affects the accuracy and completeness of your
Business Activity Statements and lodgement activities.
Integrity of business systems risk is labelled by the ATO
as the most significant GST risk in the large market
because of the multiplier effect – systematic errors within
the ERP can compound and multiply over time leading
to material underpayments and tax authority revenue
risk. The growing importance of indirect taxes to
governments for revenue purposes places more pressure
on tax administrations enforce compliance. Thus, the
ATO has shifted its approach from the standard risk
review and employed the use of modern technology and
data mining techniques using IDEA (Interactive Data
Extract & Analysis) software in E-audits as an additional
technique to detect non-compliance.
Electronic transactional data is collected from taxpayers and a series of tests are performed by CAV
specialists in IDEA. This program allows for efficient analysis of “big data” to identify potential errors in a
fraction of the time it would take under manual methods. The draft Cooperative Assurance Model from the
ATO currently lists 50 proposed tests performed on transaction data aimed at immediately exposing GST
liabilities and grouping transactions that require further investigation.
For large corporate taxpayers, the ATO also aims to differentiate its compliance approach and particular
focus is given to the larger entities under the assurance model as they present a higher risk to overall taxation
revenue through non-compliance. Moreover, government is working with commercial software developers
to enable Standard Business Reporting into business software which will streamline business-to-government
financial reporting for Business Activity Statements, Pay as You Go returns, tax file number declarations, and
company tax returns to the ATO; financial statements to ASIC; and payroll tax reports to all State and
Territory revenue offices.
Summary
The Australian Taxation Office has noticeably
increased its efforts within the past year to conduct
integrity of business systems reviews through E-
audits for taxpayers across Australia.
The audit objective is to identify risks,
irregularities, systematic errors and possible
weaknesses in system controls and the big data of
taxpayer’s electronic accounting systems. Based
on the ATO’s investment in information
technology upgrades and computer assisted
verification (CAV) specialists, companies doing
business in Australia are encouraged to conduct
an internal assessment of its accounting systems
and processes to eliminate the element of surprise
for audit liabilities that may be identified by a
future ATO E-audit.

2. It has been reported that tax forms in the Standard Business Reporting format that can be lodged directly
from the taxpayer’s accounting program to the ATO portal will be appended and subject to annual review
testing using its data mining and interrogation tool. There is a move to such audit techniques in off-shore
jurisdictions, like Malaysia with its General Audit File requirements for its new GST.
Additionally, the ATO has also proposed the introduction of a standardised chart of accounts which would
allow it more visibility into how transactions are categorised for tax purposes and readily able to identify
deficiencies.
Draft legislation has now been released to implement third party reporting and data matching. It proposes to
amend Schedule 1 to the Taxation Administration Act 1953 to improve taxpayer compliance by increasing the
information reported to the Commissioner of Taxation by a range of third parties. Transactions listed below
that occur after 30 June 2016 will be reported by relevant third parties to the ATO. Reporting will start from
1 July 2017.
• payments of grants and other financial benefits for services to government entities;
• transfers of real property and securities
• transfers of units in unit trusts; and
• business transactions made through electronic payment systems such as credit and debit cards and
online payment methods.
As the Australian Taxation Office heightens its use of data
analytics software, invests in technology upgrades and lobbies
for standardisation of tax reporting amongst businesses, there is
now a greater emphasis for taxpayers to understand their
reporting systems.
It is highly recommended, by both the ATO and tax
practitioners, for companies to conduct an internal review of the
integrity of your business systems in advance of receiving a
confirmation letter from the tax authorities. In addition to
gaining an understanding of your system’s complexity, it serves
the added benefit of being able to voluntarily disclose tax
liabilities, recover missed input tax credits, and deploying
processes to ensure preparedness for future review.
Contact
Tony Windle
Partner National Head of Indirect Tax
E tony.windle@au.gt.com
T +61 7 3222 0381
Jessica Farthing
Senior Manager
E jessica.farthing@au.gt.com
T +61 2 8297 2783
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