In brief
In September 2025, the Australian Taxation Office (ATO) released its latest Findings Report for the Top 1,000 income tax and goods and services tax (GST) assurance programs. This is also the ATO’s first Findings Report since the ATO’s March 2024 announcement of a new differentiated approach to the Top 1,000 Combined Assurance Review (CAR) program.
The data in the 2025 Findings Report covers CAR reports finalised in the 12 months ended 30 June 2025, however, does not contain commentary or findings specifically related to the new differentiated approach. Nevertheless, we continue to see many medium and high assurance taxpayers receive ‘lighter touch’ ATO requests for information consistent with the ATO’s differentiated approach. Please refer to our previous Tax Alert regarding the new differentiated approach to Top 1,000 reviews.
This report provides valuable insights into how Australia’s largest taxpayers are managing their income tax and GST obligations, the ATO’s areas of focus, and the progress made by taxpayers in tax risk management and governance.
The findings highlight both improvements and ongoing challenges, particularly in areas such as transfer pricing, related party financing, and the effectiveness of tax governance frameworks. The report is essential reading for large businesses, as it outlines the ATO’s expectations and signals where future compliance activity may be directed.
In detail
The ATO’s Top 1,000 program targets Australia’s largest business taxpayers, focusing on those with the greatest economic impact. At present, entities with a turnover exceeding $350m would generally be included in the Top 1,000 population, other than those that are part of the ATO’s Top 100 Program. Under the new differentiated approach, taxpayers are further categorised for income tax purposes into either:
- the Significant pool, which broadly includes taxpayers that have a turnover of over $1bn (or for superannuation funds, based on economic group turnover of at least $5 billion), or
- the General pool, which includes all other taxpayers in the Top 1,000 population.
As of 30 June 2025, the ATO has completed assurance reviews for 82% of the current Top 1,000 population, with the remainder either new to the program or under review. The reviews assess whether these taxpayers have paid the right amount of income tax and GST, with ratings of high, medium, or low assurance assigned based on the evidence provided.
The ATO has completed 1,176 reviews for income tax on 794 taxpayers that are within the current Top 1,000 population (following the recalibration of the population in 2024). Of these taxpayers, 394 have been reviewed more than once. Key observations from the Findings Report in relation to income tax include:
- 26% of taxpayers achieved a high assurance rating, meaning the ATO is confident they have paid the correct amount of tax for the years reviewed. 32% of taxpayers in the Significant pool received a high assurance rating.
- The majority (63%) received a medium assurance rating, indicating some areas require further evidence or analysis.
- 57% of taxpayers received a stage 2 or 3 rating for tax governance. In order to achieve a stage 3 rating for tax governance, a taxpayer must have completed operational effectiveness testing of their Justified Trust tax controls and have addressed any issues identified.
- For the reviews conducted in 2025, only 6% were escalated for further action by the ATO.
As of 30 June 2025, the ATO has completed 735 GST assurance reviews on 643 taxpayers, with 103 taxpayers receiving a GST assurance rating more than once. Key observations from the Findings Report in relation to GST include:
- 41% of all taxpayers reviewed as part of the Top 1,000 program achieved a high assurance rating, indicating the ATO is confident they have paid the correct amount of GST for the periods reviewed.
- 54% received a medium assurance rating, meaning some areas require further evidence or analysis.
- Only 5% were rated as low assurance, reflecting specific concerns about GST compliance.
- 48% of taxpayers received a stage 2 or 3 rating for tax governance.
- 34% of taxpayers reviewed made a voluntary disclosure once notified of a review and before receiving the ATO’s recommendations, suggesting this is not being identified as part of the taxpayer’s regular governance process.
In May 2025, the ATO introduced the Supplementary Annual GST Return (SAGR), requiring taxpayers who have undergone a GST assurance review to disclose information on prior ATO recommendations, GST governance, Analytical Tool results, material uncertain GST positions, and significant GST errors or input tax credits from past periods. The ATO will use these disclosures to conduct more targeted and efficient reviews and may decide that a GST assurance review is unnecessary in some cases. This is expected when:
- A taxpayer has an overall medium or high GST assurance rating and a Stage 2 or 3 GST governance rating.
- Previous recommendations have been properly addressed.
- The information assures the ATO that GST governance investment continues and GST is correctly reported.
Taxpayers meeting these criteria may benefit from less intensive or no GST assurance reviews. It remains to be seen if the ATO will reward such taxpayers in a lighter touch and more targeted review in the future.
For both income tax and GST, there is a positive trend—taxpayers reviewed more than once are increasingly moving from medium or low to high assurance ratings, showing improvements in income tax and GST compliance and governance.
Common areas of concern and ATO focus
The ATO’s reviews consistently identify several areas that attract close scrutiny. These are summarised below.
Income tax
- Transfer pricing: Failure to maintain adequate information to support transfer pricing positions is one of the most common reasons for a taxpayer obtaining a low or medium assurance rating for transfer pricing. The most common area of review relates to non-financing related party transactions. About 24% of the ATO next action audits include transfer mispricing issues (other than financing). The ATO is concerned about mischaracterisation or mispricing of related party dealings, particularly in the areas of licence fees, royalties, and the supply of goods and services.
- Related party financing: Arrangements that do not reflect arm’s-length terms or are structured to avoid withholding tax are a key focus. The ATO expects robust, contemporaneous evidence to support the commerciality of these arrangements.
- Thin capitalisation: Since the new thin capitalisation and debt deduction creation rules are likely to have a significant impact on Top 1,000 taxpayers, this will be a key focus area in combined assurance reviews. The ATO expect taxpayers to implement strong processes to deal with these new provisions, including appropriate consideration of the matters set out in the relevant ATO guidance products.
- Hybrid mismatch arrangements: The ATO is increasingly focused on compliance with hybrid mismatch rules, with a particular emphasis on the processes and documentation supporting these positions.
- Tax structuring and anti-avoidance: The ATO continues to identify arrangements designed to reduce or avoid Australian tax, including those involving intangibles, back-to-back financing, and complex group restructures. Anti-avoidance issues escalated either from a Top 1,000 review or ATO next action review are present in approximately 67% of ATO next action audits, which reflects an increase from prior years.
- Loss utilisation and capital allowances: Insufficient evidence to support the use of tax losses or capital allowance claims remains a common reason for lower assurance ratings.
GST
- GST governance and tax control frameworks: This is one of the most significant focus areas in a GST assurance review as the way systems create, capture, collate and report GST is fundamental to the correct reporting of their GST obligations.
- GST classification errors: Incorrectly classifying taxable supplies as GST-free, particularly in the areas of medical aids and appliances (e.g. wound care products, compression socks), food and beverages (e.g. food marketed as a prepared meal, fruit and vegetable juice beverages), and dual-purpose products (e.g., sunscreen with moisturiser).
- Staff expenses: Failure to account for GST on post-tax employee contributions or incorrectly claiming input tax credits on non-deductible entertainment expenses. These errors can have flow-on impacts on other tax obligations, such as fringe benefits tax and income tax.
- Financial supplies: Incorrectly claiming input tax credits on costs relating to mergers, demergers, company acquisitions, initial public offerings, due to issues with the application of the Financial Acquisition Threshold, incorrectly claiming reduced input tax credits on ineligible costs, and not applying reverse charge provisions to overseas services.
- Attribution and adjustments: Mistakes in accounting for rebates, discounts, and adjustment events, as well as errors in the timing of GST reporting.
- Recipient created tax invoices (RCTIs): Lack of valid RCTI agreements in place and insufficient procedures for monitoring the suppliers GST registration status.
- GST analytical tool (GAT): For taxpayers that predominantly make taxable supplies, the GAT is a compulsory element of GST assurance reviews as it is used to provide assurance, identify key risk areas, and assess whether GST is correctly reported. The ATO notes that taxpayers who make a minimal or no attempt to complete the GAT can expect a low assurance or red flag for the GAT, which means that they are unable to achieve an overall high assurance rating.
- GST data and transaction testing: For taxpayers that predominantly make input taxed supplies such as financial services (including life insurance), the ATO uses data and transaction testing to assess correct reporting. The ATO provides limited comments in the Findings Report on this.
Governance and controls testing
Effective tax risk management and governance are central to achieving a high assurance rating. The ATO assesses whether taxpayers have a fit-for-purpose tax control framework that is both designed and operating effectively.
As an increasing proportion of the Top 1,000 population continue to achieve a stage 2 or 3 governance rating, periodic internal controls testing will continue to be an increasingly important cornerstone of the ATO’s expectations for effective tax risk management and governance among large taxpayers. Achieving stage 3—the highest governance rating—requires not only having documented controls but also demonstrating, through objective evidence, that these controls are regularly tested and are operating effectively in practice.
Specifically, the ATO’s expectations are that there is:
- Documented tax control frameworks: Taxpayers should have formal, board-endorsed frameworks that clearly define roles, responsibilities, and procedures for identifying and managing tax risks.
- Periodic internal controls testing: The ATO expects regular, independent testing of tax controls, with results reported to the board and any issues promptly addressed. Testing should be conducted by individuals or functions independent of the tax control owners, such as internal audit or external parties. It will be important to ascertain whether a third party is independent for the purposes of undertaking internal control testing, since the ATO will not issue a Stage 3 rating if the tester is not considered independent. In this respect, the ATO indicates that it is relevant to consider whether the third party has undertaken any of the responsibilities of the control owners, including where the third party has undertaken the design of any of the tax controls, or the third party has undertaken the income tax preparation work.
- Governance over third-party data: Investment industry entities should expect this to be a continued key focus area, with the ATO announcing that a stage 2 rating is the expected industry standard, i.e. there are effectively designed third-party data controls in place. For investment industry entities, the ATO is particularly focused on controls over data provided by outsourced service providers, including regular board reporting on service provider performance and breaches. The ATO has noted these expectations for third-party data tax controls apply equally to investment industry entities that perform in-house investment and administration functions rather than relying on an outsourced service provider.
- Controls in place for data: From a GST perspective, taxpayers should have robust controls and documented procedures in place for data in relation to GST tax code setup/maintenance for the accounts payable and accounts receivable functions, implementation and maintenance of customer, vendor and product master files, as well as manual adjustments that are outside the usual ledgers.
The ATO’s latest Findings Report highlights a clear trend—taxpayers who commit to, and complete periodic internal controls testing are more likely to progress from stage 1 or 2 to stage 3 governance ratings. However, the ATO has stated they will consider downgrading a taxpayer’s governance rating to Stage 1 if no periodic internal controls testing has been conducted in line with a commitment to testing tax controls that has been endorsed by the Board or Board equivalent.
The Findings Report notes a growing number of taxpayers achieving higher ratings as they implement regular testing and address any issues identified.
The ATO reports that many taxpayers have not fully extended their tax governance frameworks to cover GST, particularly in areas such as periodic internal controls testing, data management, and annual reconciliations between BAS outcomes and audited financial statements.
The takeaway
Any taxpayer that meets the criteria to be included in the ATO’s Top 1,000 Program that has not yet had a review, should be prepared for a forthcoming review as it is clear they will be considered for selection by the ATO in coming years.
The ATO’s latest Findings Report underscores the importance of robust tax governance, comprehensive documentation, and proactive risk management for large businesses. While there is clear progress, particularly among taxpayers reviewed multiple times, common pitfalls remain—especially in transfer pricing, related party financing, and the operation of tax control frameworks.
It is recommended that businesses should review their current practices in light of the ATO’s findings, ensure their tax governance frameworks are up to date, and be prepared to provide detailed, contemporaneous evidence to support their tax positions. Early action to address identified gaps will not only improve assurance outcomes but also reduce the risk of further ATO compliance activity.
Contact us
Sarah Saville
Partner, Tax Reporting and Innovation, PwC Australia
Mark Simpson
Partner, Tax, PwC Australia
Matthew Strauch
Partner, Tax Reporting and Innovation, PwC Australia
Chris Vanderkley
Special Counsel, PwC Australia
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