Seven Principles of Effective Tax Governance
Managing your tax and superannuation obligations effectively is critical for maintaining compliance and minimising risk. Implementing these seven principles of tax governance will help ensure your business remains on track and in good standing with the ATO.
- Accountable Management and Oversight
Clear roles and responsibilities are the foundation of effective tax governance. As a business owner, you should:
- Understand your tax and super obligations, including registrations, lodgments, reporting, payments, and record-keeping.
- Clearly define tax roles within your organisation using organisational charts, role descriptions, lodgment calendars, or procedure documents.
- Establish the role of external tax advisors through engagement letters, agreed scopes of work, and lodgment schedules.
- Ensure financial capacity to meet tax obligations as they fall due.
Ultimately, while you may rely on tax advisors for support, you remain accountable for compliance.
- Recognising Tax Issues and Risks
Effective tax governance requires proactive identification and management of tax risks before they escalate. This involves:
- Integrating tax considerations into business decision-making processes.
- Documenting material transactions and ensuring they undergo appropriate tax review.
- Developing a plan to manage identified tax issues and mitigate disputes with the ATO.
- Implementing a structured approach to tax compliance, including the preparation and review of income tax returns, BAS, and FBT returns.
- Ensuring proper controls over tax data accuracy, reconciliation, and review processes.
By anticipating tax implications early, you can avoid unnecessary complications and penalties.
- Seeking Professional Advice
Having structured processes for seeking tax advice helps in making informed decisions and reducing compliance risks. Your governance framework should:
- Establish clear thresholds for when and how to escalate tax issues and seek external advice.
- Engage tax advisors for significant transactions or atypical business changes.
- Ensure facts and assumptions used in tax advice are accurate and up to date.
- Reference ATO guidance and, where necessary, engage directly with the ATO to gain clarity.
A well-documented approach to seeking advice ensures that tax-related matters are handled efficiently and with confidence.
- Integrity in Tax Reporting
Your financial records should provide a true and fair representation of your business operations. To maintain integrity in tax reporting:
- Ensure tax positions align with legal requirements and accurately reflect economic performance.
- Maintain systems and controls for accurate tax reporting, regularly reviewing their effectiveness.
- Implement strong record-keeping practices to ensure accessibility and compliance with legal retention requirements.
- Conduct periodic reviews to identify and address discrepancies between financial and tax reporting.
- If financial accounts are audited, ensure the audit report supports their accuracy.
Good record-keeping and transparent reporting foster trust with the ATO and mitigate compliance risks.
- Maintaining a Professional and Productive Relationship with the ATO
An open and respectful working relationship with the ATO can help prevent disputes and streamline compliance processes. Effective tax governance includes:
- Transparent communication with the ATO, either directly or through your advisors.
- Proactive resolution of tax issues to avoid unnecessary disputes.
- Maintaining professionalism in all interactions with tax authorities.
A positive relationship with the ATO can lead to smoother compliance and reduced scrutiny.
- Meeting Lodgment and Payment Obligations
Timely lodgments and payments are a fundamental aspect of effective tax governance. Your business should:
- Establish clear timelines for tax lodgments and payments.
- Monitor tax liabilities to ensure they are met on time.
- Engage with the ATO early if payment difficulties arise to explore available options.
Meeting tax deadlines not only avoids penalties but also demonstrates sound financial management.
- Ethical and Responsible Tax Behaviour
Beyond compliance, ethical tax behaviour means acting with honesty and integrity. Effective governance involves:
- Adhering to the taxpayer charter and community expectations.
- Avoiding aggressive tax avoidance strategies or manipulative tax schemes.
- Engaging a trusted advisor to ensure ongoing compliance and ethical tax practices.
Acting ethically in tax matters builds credibility and protects your business from reputational and financial risks.
Need Support?
Tax governance can be complex, but you don’t have to navigate it alone. A trusted tax advisor can help manage your obligations, streamline compliance, and maintain a strong relationship with the ATO. If you need assistance, our team is ready to help—reach out today!
