The ATO’s FY27 GST Strategy for the financial services and insurance sectors 

The Australian Taxation Office (ATO) has released its 2026-27 GST strategy for the financial services and insurance sectors (FSI), setting out its areas of focus for the year. For FSI taxpayers, the strategy is a clear signal of the GST risk areas and business sectors the ATO will focus its compliance efforts on this financial year.

The ATO intends to undertake a significant volume of compliance activity in the FSI sector this year, covering a quarter of those taxpayers in the Top 100 and Top 1,000 population.

The ATO has identified non-bank lending and insurance as the key sectors that should expect increased compliance activity, with a number of other sectors also receiving focus. In relation to key GST issues, the ATO has identified the application of the associate market value rules in Division 72 of A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) in relation to non-bank lending, mergers and acquisitions (M&A) related costs and funds management, as well as reduced input tax credit (RITC) claims and apportionment across a number of sectors as specific issues it will focus on.

The FSI sector covers a mix of domestic and foreign financial institutions, insurers, and superannuation funds in the Top 100 and Top 1,000 groups. The ATO publishes its areas of focus across FSI sector taxpayers each year.

Compliance activity

The ATO continues to undertake compliance activity in respect of FSI taxpayers through both combined assurance reviews (CARs) under its Justified Trust program for Top 100 and Top 1,000 taxpayers and GST specific risk reviews. CARs cover broader aspects of a taxpayer’s tax affairs, including governance, while risk reviews are targeted at risk areas specific to GST and financial services, including RITCs, apportionment and reverse charge. The ATO has advised that it expects to undertake a significant number of combined assurance and risk reviews of FSI taxpayers within the Top 100 and Top 1,000 population during the 2026-27 year covering up to a quarter of taxpayers, with compliance activity anticipated to increase in the coming months.

Areas of focus

For the 2026-27 year, the key areas of focus are expected to include:

Sector focus - the ATO has identified a number of specific sectors and arrangements for focus in 2026-27, including:

• non-bank lenders
• general and life insurers
• credit scheme sponsorship arrangements
• litigation funders
• crypto exchanges and ATMs
• brokers and intermediaries, and
• motor vehicle financiers.

Related party and cross-border arrangements - the ATO continues to focus on the GST treatment of arrangements involving foreign and related entities, including:

• the application of the Division 72 associate market value rules, which apply to supplies between associates for no or inadequate consideration
• reverse charge obligations for acquisitions from overseas suppliers
• GST treatment of M&A-related costs between related parties incurred in relation to transactions
• related entities acting as responsible entity, administrator or investment manager, and
• the unabsorbed contribution rules for certain offshore related-party services, which can affect the amount eligible for a reduced input tax credit (RITC).

GST apportionment - apportionment remains a key area of focus for both domestic and foreign financial services businesses. In particular, the ATO has identified support function costs and how those costs are apportioned across taxable, GST-free and input taxed activities. Sector specific apportionment methods and issues will also be a key focus for the ATO.

Reduced input tax credits - the ATO continues to focus on the scope of RITC claims across all financial services sectors, including consumer credit, M&A activities, funds management and life insurance. In particular, the ATO is looking at whether services on which RITC claims are being made fall in the prescribed reduced credit acquisition item and services which may include various bundled activities. Some specific RITC items called out by the ATO include:

• Item 6 payment system fees
• Item 9 securities transaction arrangement services
• Item 16 supplies to credit unions by certain collectively owned entities
• Items 23 and 24 (investment portfolio management and investment fund administration) for funds, trusts and special purpose vehicles (SPVs), particularly where third-party costs such as legal, audit, marketing, rating agency and advisory fees are passed through administrators, managers or trustees, and
• Item 26 life insurance administration services.

M&A and IPOs - M&A and initial public offering (IPO) transactions remain a significant area of focus with a number of key GST issues on the ATO’s radar. For example, the monitoring and identification of financial acquisitions threshold breaches by entities undertaking M&A and capital raising activities, the application of the Division 72 associate market value rules to M&A-related costs and the claiming of RITCs on transaction costs.

The ATO has a comprehensive compliance strategy for the FSI industry in 2026-27 with high levels of proactive taxpayer engagement expected and clear areas of focus on particular businesses, activities and key GST issues.

We recommend FSI taxpayers review these risk areas and consider their current GST positions - either as part of regular governance and compliance activities, or in preparation for a potential ATO review. Early review will help confirm robust, contemporaneous evidence is available to support positions adopted, identify any gaps, and correct any issues before they attract ATO attention. 

To discuss how the ATO’s focus areas apply to your business, please contact your regular PwC contact or one of our GST FS specialists listed below.