STATEMENT
The Cooperative Compliance Model outlines the cooperative relationship the Tax Office seeks with large businesses and the wider community.
A GST Cooperative Compliance Advance Agreement ('Advance Agreement') is based on the principles contained in the Cooperative Compliance Model.
Advance Agreements allow large businesses and the Tax Office an opportunity to cooperatively address key risks in a GST environment.
A business seeking to enter into an Advance Agreement must commit a level of resourcing that would enable it to independently conduct a detailed self-examination of its internal controls and accounting systems.
A business will need to have demonstrated a high level of self-compliance with the GST law before it can enter into an Advance Agreement with the Tax Office.
An Advance Agreement enables a business to reduce its risk of audits and penalties, provided it properly implements and maintains the agreed assurance processes.
This Practice Statement is designed to provide direction to Tax Office staff on the procedures to adopt when entering into an Advance Agreement.
This Practice Statement applies to the large business segment including state-owned corporations and government bodies.
The person able to enter into an Advance Agreement on behalf of the Commissioner of Taxation is the Deputy Commissioner, Senior Assistant Deputy Commissioner or relevant Assistant Deputy Commissioner of the GST business line.
Once an Advance Agreement has been signed, it will be recorded on a central register for access by Tax Office staff.
EXPLANATION
An Advance Agreement is a written agreement that formally acknowledges self-regulation and cooperation in accordance with the Tax Office's Cooperative Compliance Model.
An Advance Agreement is a compliance product introduced for the purpose of promoting greater certainty, reducing compliance costs and improving administration for businesses in meeting their GST obligations.
An Advance Agreement is tailored to those businesses that the Tax Office has established as having demonstrated a high level of self-compliance with the GST law.
Prior to entering into an Advance Agreement, businesses will be required to undertake a detailed self-examination of the adequacy of their accounting systems and internal controls. The recently released publication, The Better Practice Guide for GST Administration (see paragraphs 22 to 24) can assist businesses in their self-examination.
Businesses will need to satisfy certain requirements before the Tax Office will agree to enter into an Advance Agreement. These requirements are that they have: • Demonstrated a high level of self-compliance with the GST law; • Performed a rigorous self-examination of processes and system controls; • Demonstrated a high level of commitment toward cooperative compliance; and • Agreed to allow Tax Office staff to have full and free access to systems, training and system manuals and relevant personnel.
The Tax Office will review and test their systems and controls, in accordance with Tax Office work practices, to determine whether they demonstrate a high level of self-compliance with the GST law.
Where businesses demonstrate a high level of self-compliance, the Tax Office may enter into an Advance Agreement with them. Continuance of an Advance Agreement is subject to businesses periodically undertaking specific tasks and providing update reports to the Tax Office to demonstrate their ongoing commitment in maintaining and continuing to improve their controls of the GST risk categories identified.
An Advance Agreement is a written agreement between a business and the Tax Office. It may be varied or terminated at any time with the agreement of both parties. Attachment A contains a model of an Advance Agreement.
An Advance Agreement should clearly state the terms agreed between the parties. Included in the terms is an assurance that a business has implemented processes to adequately control its GST risks in respect to the categories listed below. The categories are not meant to be exhaustive or exclusive and are provided for guidance only. • Business Activity Statement (BAS) Compilation • Identifying all GST transactions • Tax Coding • Data Entry • Statutory Documentation • Attribution • Adjustments • System Configuration
The following checklist of items is not intended to be compulsory in every Advance Agreement, nor is the list meant to be exhaustive. There will be cases where other items will need to be included subject to negotiation between the relevant parties to the Advance Agreement. The items that will generally be in an Advance Agreement are: • Heading • Name of the taxpayer • The terms of the agreement • Date of the agreement • Signature blocks • Details of the specific tasks and reports undertaken by the taxpayer and submitted to the Tax Office
As part of an Advance Agreement, the person authorised to enter into an Advance Agreement (see paragraph 9), will give an undertaking to give strong favourable consideration towards: • exercising the Commissioner's discretion in remitting administrative penalties (see Law Administration Practice Statements PS LA 2000/9 and PS LA 2002/8) and General Interest Charges (GIC) in accordance with the GIC remission guidelines set out in Chapter 93 of the ATO Receivables Policy; and • determining reduced frequency and scope of future GST audits for that business.
To assist in demonstrating a high level of compliance with the GST law, a business is encouraged to access The Better Practice Guide for the Management of GST Administration (the Guide) that is available on the Tax Office website at www.ato.gov.au. The Guide focuses on the administration of GST and addresses gaps and weaknesses in GST administration identified by the Australian National Audit Office (ANAO) and the Tax Office.
The Guide describes Six Better Practices which are listed below: • Apply a risk management approach to GST administration; • Establish an internal control environment that effectively supports GST processing; • Identify and document all GST impacted transactions in the organisation's operations and the technical positions that relate to them; • Process and report GST transactions in an accurate, complete and timely manner; • Manage changes that impact on GST administration; and • Monitor and review the effectiveness of GST administration.
Each of the Guide's six chapters covers one of the better practices and provides advice on how they might be achieved. The Guide also includes an accompanying workbook and a self-assessment checklist that provides tools, templates and checklists that can be used by businesses in implementing a better practice framework.