In brief
The Australian Taxation Office (ATO) has recently released its 2025-26 goods and services tax (GST) strategy for the financial services and insurance (FSI) sectors. The strategy outlines the areas the ATO’s FSI GST team will focus on during the current financial year and provides insights into the GST risk areas the ATO believes are impacting these sectors.
In detail
The FSI sector covers a mix of domestic and foreign financial institutions, insurers, and superannuation funds in the Top 100, Top 1,000 and large risk strategy groups. Annually, the ATO publishes its areas of focus across FSI sector taxpayers. For 2025-26, the key areas of focus include:
- GST apportionment: The ATO has identified a number of areas of specific concern in relation to apportionment including revenue methods that include GST-free acquisition-supplies, inputs methods that do not reflect cost consumption and methods that are infrequently reviewed and updated (‘set and forget’).
- Reduced input tax credits (RITCs): The ATO continues to focus on RITCs and the scope of services included in RITC claims, such as the inclusion of audit, legal and actuarial costs in RITCs claimed by investment funds for administrative, investment management and custody functions, the scope of RITCs claimed by credit unions and the proper exclusion of ‘unabsorbed contributions’ from RITC claims on services received from foreign related parties.
- Reverse charge: Similarly the ATO continues to focus on reverse charge for financial suppliers acquiring services from overseas, particularly, in relation to the services received by Australian branches of foreign banks and profit share/cost allocation arrangements.
- Mergers, acquisitions and IPOs: The ATO has concerns in relation to mergers, acquisitions and capital raising activity undertaken by taxpayers more broadly, including errors made in assessing the financial acquisitions threshold and entitlement to claim GST input tax credits, as well as failures to consider the market value associates rules where services are performed without costs being passed on.
- FSI sector focus: The ATO has also identified a number of particular FSI sectors where it sees specific issues, including foreign financial suppliers (foreign banks, credit providers and life insurers), general insurers (in particular in relation to motor vehicle insurance and the correct application of the GST insurance rules for claims settlements) and cryptocurrency intermediaries. The ATO also intends to focus on specialist lenders, including non-bank lenders, reverse mortgage lenders, insurance premium funders, litigation funders and invoice factoring.
The takeaway
The ATO has undertaken significant review activity in the FSI sector over recent years, both through its Justified Trust assurance program for Top 100 and Top 1,000 taxpayers and more specific financial services GST risk reviews. Under those reviews, the ATO requests detailed explanations of the GST positions adopted and the information and calculations supporting those positions.
We recommend that taxpayers in the FSI sector consider the areas of focus identified by the ATO as part of their regular GST governance and compliance activities or as preparation for a potential ATO review. This will assist you to ensure you have robust support for the positions adopted, as well as to identify any gaps in objective evidence supporting your positions and identifying any positions that may require further consideration or correction.
Please contact your regular PwC contact or any one of our GST FS specialists set out below if you would like to have a more detailed discussion on the ATO’s areas of focus.
Contact us
Matthew Strauch
Partner, Tax Reporting and Innovation, PwC Australia
Mark Simpson
Partner, Tax, PwC Australia
Aditya Khanna
Director, Tax, PwC Australia
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