Australian Tax Office Audit Program Gets Thumbs Up

The Tax Management Transfer Pricing Report ™ provides news and analysis on U.S. and international governments’ tax policies regarding intercompany transfer pricing.

By Murray Griffin

Sept. 2— Australia's auditor-general gave a positive review of a tax office trial of new standardized procedures which used auditors to check for errors in tax returns filed by large business taxpayers.

The auditor-general Aug. 31 released a report on an Australian Taxation Office (ATO) pilot program which used registered company auditors to verify certain factual matters in large taxpayer returns.

The “external compliance assurance process” pilot ran for about six months between 2014 and 2015 involving 56 companies, of which 29 completed the full process.

The companies were rated as “low” or “medium” risk by the ATO, and had an annual turnover of between A$100 million ($75,493 million) and A$5 billion.

The auditors used standardized procedures to verify factual aspects on eight matters—capital gains tax net capital losses; capital gains incorrect reporting; research and development recoupment; tax losses; capital allowances project asset pools; and software income.

The audit—which assessed the performance of the ATO in conducting the pilot without examining the merits of the initiative—concluded the ATO conducted the pilot effectively and that it provided “a sound basis for conducting external compliance assurance processes for large business taxpayers in the future.”

But a more general deployment of the external vetting procedure isn't likely to happen any time soon.

Program on Hold

Partly on the basis of negative media coverage about outsourcing ATO tasks, the organization has put the program on hold.

Instead, lessons learned from the pilot are being used to streamline in-house reviews by ATO staff.

An ATO spokesperson Aug. 31 told Bloomberg BNA by e-mail that using “standardized fact-finding procedures” can be an effective way to resolve certain some matters at a lower cost for taxpayers and the ATO.

“The ATO has continued to develop standardized procedures to gather facts for specific risks since the pilot, and is looking for opportunities to expand this approach for other factual risks,” the spokesperson said.

“The efficiencies from this approach frees up ATO staff to do other higher-value work,” the spokesperson said.

Some media reports had described the project as an outsourcing exercise, but the ATO “has been very clear since the commencement of the pilot that these approaches are only used to gather facts so that decisions about tax liabilities may be made by ATO officers,” the spokesperson said.

To contact the reporter on this story: Murray Griffin in Melbourne at

To contact the editor responsible for this story: Penny Sukhraj at

For More Information

The report, “Conduct of the External Compliance Assurance Process Pilot,” is at

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