In brief
The Supplementary Annual GST Return (SAGR) represents a significant change in the GST reporting obligations for Top 100 and Top 1,000 taxpayers. The information reported in the SAGR is intended to enable the Australian Taxation Office (ATO) to identify emerging GST risks and monitor the accuracy of a taxpayer’s GST reporting and progress on GST governance. Ultimately, the ATO proposes to use this information to customise the scope and intensity of future GST assurance reviews according to the taxpayer’s unique risk profile.
For taxpayers, whilst the SAGR does impose a new and additional GST compliance reporting obligation, it also represents an opportunity to proactively shape their ongoing engagement with the ATO on GST. Taxpayers who incorporate the new reporting requirements into their existing GST controls frameworks should not only benefit from efficiencies in preparing the SAGR each year but also receive a more tailored approach from the ATO in relation to GST Justified Trust.
In this article, we share our insights and observations on what taxpayers can do to streamline the process for preparing the SAGR and potentially benefit from a lighter touch approach from the ATO in future ATO GST assurance reviews, optimise their SAGR disclosures or prepare for a future GST assurance review and align with best practice expectations.
In detail
Overview of the new SAGR
The SAGR must be completed by Top 100/1,000 taxpayers who have received a GST assurance rating via a GST assurance report issued by the ATO. It requires taxpayers to undertake an annual self-assessment and make disclosures relating to the following key areas:
- ATO recommendations, areas of low assurance or red flags from prior GST assurance reviews (ATO Recommendations)
- GST governance frameworks
- alignment between GST and financial statements (GST Analytical Tool or GAT)
- material uncertain GST positions, and
- material GST reporting errors or credits claimed in a later BAS.
The due date for the SAGR depends on the taxpayer’s year end and is generally at least seven months after the financial year-end. Importantly, the SAGR does not replace any other GST returns that are required to be lodged, and penalties can apply if it is not lodged on time, or if false or misleading statements (including omissions) are made. Further details on the SAGR can be found in this Tax Alert.
The primary objective of the annual SAGR is to gather information relevant to the taxpayer since their most recent GST assurance review. This process enables the ATO to identify and monitor emerging GST risks, assess its confidence in the accuracy of the taxpayer’s GST reporting, and determine the necessary level of ongoing investment in GST governance. Ultimately, the insights gained allow the ATO to customise the scope and intensity of future GST assurance reviews according to the taxpayer’s unique risk profile.
ATO recommendations from prior GST assurance reviews (Section B of SAGR)
Taxpayers must disclose actions taken to address ATO recommendations, red flags, areas of low assurance, as well as any outstanding items. The ATO describes ‘ATO recommendations’ as any governance suggestions, enhancements from earlier reviews, and recommendations related to specific risks or issues.
The SAGR pilot provided useful insight on the responses that the ATO found more and less helpful. The ‘more helpful’ responses included detailed explanations of how recommendations were implemented, such as through modified arrangements, additional documentation like transaction documents, GST technical papers, or external expert advice. Additionally, certain taxpayers created structured action plans with timelines and consulted external advisers to address future ATO recommendations. The ‘less helpful’ responses where those that ignored the ATO’s recommendations and took no action or only commented on a few of the ATOs recommendations.
In our experience, the intensity of responding to a GST assurance review can often lead to a pause in focus on the outcomes of the review, particularly where there is a need to immediately deal with other matters that could not receive the necessary attention during the review. However, this pause can often be extended beyond what is intended, meaning ATO observations and recommendations inadvertently go unactioned. We highly recommend that taxpayers promptly review the GST assurance report and develop a clear plan to action with priorities, even if such action may be deferred or undertaken over a period of time. Ideally, higher priority actions should be implemented before the next SAGR lodgment deadline. If certain recommendations cannot be actioned in time, taxpayers should prepare a narrative explaining why and when they will be addressed. Such narratives should consider the message it conveys regarding the taxpayer’s approach to GST governance and GST Justified Trust.
For ATO recommendations that have already been actioned, or a decision has been made that no further action is required (for example further investigations show no further action is required), taxpayers should gather and retain objective evidence to demonstrate how these matters have been actioned. Maintaining an internal file note or some form of external advice, together with supporting documentation, is recommended. This not only creates a record for future reference but also safeguards against key person risk within the organisation.
The ATO has made it clear that taxpayers who proactively address its recommendations are likely to be viewed more favourably in future engagements. By taking timely action, taxpayers can position themselves well for their upcoming SAGR lodgment and any subsequent interactions with the ATO. Taxpayers who do not implement ATO recommendations risk facing more rigorous future GST reviews. While it is unclear whether this could also lead the ATO to accelerate the timing of subsequent GST reviews, such an outcome remains possible.
Based on our experience, most GST assurance reports highlight the need for enhanced GST governance. Common recommendations include improving the quality and comprehensiveness of GST governance documentation, ensuring frameworks are appropriately tailored to address specific GST risks relevant to the taxpayer’s business, and implementing regular testing to confirm that these frameworks are operating effectively. Taxpayers who have not yet undergone a review should take proactive steps to address these areas. Establishing robust, well-documented GST governance frameworks that are aligned with ATO expectations is critical. Failure to do so may result in the ATO raising similar recommendations in future GST assurance reports, which will then need to be addressed in the first SAGR lodged after the review.
Further insights on GST governance are outlined below.
GST governance (Section C)
This section on GST governance is made up of the following two key disclosures
1. Disclosures relating to ‘material business changes’ or ‘material system changes’
Taxpayers must describe significant business or system changes that impact their GST control framework since their most recent GST assurance review.
The ATO has provided limited guidance on interpreting these phrases, mainly through examples involving a new IT system and business acquisition. In our view, ‘material business changes’ cover scenarios like significant modifications to core products or services, mergers and acquisitions, shifts in customer or market focus (such as expanding from wholesale to retail), and fundamental changes to business models or methods of operation (such as moving from storefronts to an online platform). Additionally, ‘material system changes’ should include major ERP system changes and critical connected subsystems for capturing and processing sales and purchase data. This could include point-of-sale systems, contract management, inventory management, and employee expense management systems. It would also include new GST compliance software.
In the absence of further clarification, taxpayers should proactively define these phrases within their GST governance frameworks. Clear processes should be established to identify and manage GST risks arising from such changes, and robust controls should be implemented to mitigate these risks. Notably, the ATO has indicated that it will consider the impact of material system changes on GST governance as part of its GST assurance programs.
2. Self-assessment of GST governance
Taxpayers must self-assess their current GST governance framework against the GST governance rating provided by the ATO in their most recent GST assurance review and provide reasoning to support this assessment.
To conduct an effective self-assessment, taxpayers must develop a comprehensive understanding of the ATOs expectations for each of the three GST governance stage ratings. These expectations are set out in section 3.2 of the ATO’s GST Governance, Data Testing and Transaction Testing Guide (GST Guide) as well as the ATO’s Tax Risk Management and Governance Review Guide (Tax Governance Guide).
Taxpayers should proactively gather objective evidence to substantiate their self-assessment, as the ATO may request this during future reviews. The ATO requires that such evidence be formal and well-documented, typically in the form of written policies and procedures. Informal materials, such as PowerPoint presentations that comprise narrative descriptions (as opposed to documenting the relevant process), are not considered adequate. Examples of acceptable documentation that contribute to a robust Stage 3 (being the highest rating stage) GST control framework include:
- a tax strategy/policy document describing how the organisation identifies and manages tax risks (including GST)
- documentation of GST controls for your business systems setup, transaction processing, and Business Activity Statement (BAS) preparation processes, as well as controls documentation for particular GST risk and compliance processes (e.g., the financial acquisitions threshold and the reconciliation of GST reported to financial statements)
- a GST systems architecture diagram which outlines the end-to-end flow of transactions or sub-processes from data entry to BAS—we refer to this as the GST Universe!
- a GST risk and control matrix that evidences the design effectiveness of the GST control framework
- a Board endorsed multi-year GST controls testing plan that aligns with the ATO’s expectations, and
- reports from independent assurance providers (internal or external) that present findings on the operational effectiveness of the tax control framework as well as evidence that the Board (or sub-committee) has reviewed the results and any proposed remediation plans to be implemented by management for tax control failures.
It is crucial to recognise that establishing or enhancing GST governance documentation is difficult to do in the short timeframe (approx. four months) available once the ATO issues a formal SAGR notification. Taxpayers are therefore strongly encouraged to prioritise the development and maintenance of robust GST governance frameworks at the earliest opportunity.
Taxpayers anticipating a GST assurance review should invest in understanding the ATO’s GST governance stage ratings and expectations and assess their GST governance frameworks against these expectations. Any identified gaps should be promptly addressed or managed through a clear action plan with defined timelines. We note that the ATO will specifically request a GST gaps analysis as part of its information request in connection with a GST assurance review. Failure to action any GST governance gaps identified in such an analysis increases the likelihood of ATO recommendations, which must be implemented and reported in the first SAGR after the review.
Proactive identification and resolution of issues can improve governance ratings and reduce the scope and intensity of future ATO engagement. Since responses to ATO information requests during a GST assurance review are generally required within 56 days and blanket extensions are harder to secure, timely and comprehensive preparation is essential.
GST Analytical Tool (GAT) (Section D)
In this section of the SAGR, taxpayers are required to disclose whether a GAT reconciliation (or similar) has been performed. They must also provide the effective GST rates applied to sales and purchases, the net effective GST rate and provide commentary on any remaining variances. Notably, taxpayers whose activities predominantly comprise of input-taxed supplies are exempt from completing the GAT and are expected to respond ‘no’ to this question.
The GAT must start with the audited financial statements, but the bulk of the work starts with the detailed trial balance. At its essence, the adjustments that need to be made are all about GST grouping (for example differences between the economic group and GST group), transactions that are not subject to GST (for example, export transactions, salaries and wages) as well as adjusting for differences between your statutory accounting method and invoicing for GST (for example, prepayments).
The GAT can be a difficult exercise for large, complex corporate groups where there is significant misalignment between the economic group and the GST group. Even for smaller simpler groups, inevitably there are challenges. The first time is always the hardest, it does get easier the second or third time around, but more often, there are further refinements that are made, as the understanding of the differences between the P&L and BAS reporting increases. Whilst there is greater understanding, there is still significant amount of work to be done to quantify the adjustments and substantiate them with objective evidence such as with general ledger account balances as well as identifying journals or types of transactions. For example, for GST-free transactions, a taxpayer can’t simply default to the GST treatment applied in the BAS as the ATO expects that they are identified from the accounts.
For the reasons set out above, in our experience it is difficult to automate the GAT in a way that meaningfully creates efficiencies; however, we think there is a way to accelerate this process by creating a BAS trial balance to compare to the P&L trial balance.
In this regard, we have developed a technology solution called the GAT accelerator to assist taxpayers with efficiently completing the GAT, which leverages our BAS automation solution, ITX Edge. Whilst traditional GAT preparation methods adopt a top-down strategy, beginning with the financial statements and analysing from the trial balance down to the BAS, our solution adopts a more dynamic, hybrid approach that not only supports the conventional top-down methodology but also enables a bottom-up review, driven by actual BAS transactions. This bottom-up method offers increased insight into GST flows across financial ledgers, thereby expediting GAT preparation through ITX Edge’s transaction-based analysis.
Completing the GAT annually signals good GST governance to the ATO as it evidences that a taxpayer has processes in place to reconcile BAS figures with financial statements, as required under managerial level control 7. All taxpayers, whether preparing for SAGR obligations or GST assurance reviews, should undertake the GAT each year. Comprehensive documentation and retention of objective evidence are crucial to support reconciliation and explain variances. As most taxpayers find the GAT process time-consuming and complex, it is prudent to complete it proactively, rather than under the pressure of an impending SAGR lodgment deadline (typically four months from the SAGR due date from notification in the first year) or a GST assurance review response deadline (typically 56 days).
To future-proof their GST compliance, taxpayers should ensure that their GAT processes and supporting evidence are robust and can easily be followed. Taxpayers should anticipate that the ATO will request detailed information about the procedures undertaken, well-documented explanations for any adjustments or variances, and objective evidence to support such explanations, and prepare accordingly.
Taxpayers with an upcoming SAGR obligation who choose not to undertake the GAT are required to disclose their reasons to the ATO in their SAGR submission. The ATO has not provided detailed guidance on what constitutes an acceptable reason, except in cases where businesses predominantly make input taxed supplies. If taxpayers cannot complete the GAT by the SAGR due date, they should document their intended process and establish a timeline for completion. This approach signals a positive commitment to the ATO, even when immediate GAT completion is impossible.
The ATO’s approach to taxpayers who consistently report non-completion of the GAT across multiple annual SAGRs remains to be seen. The ATO may broaden the application of GST transaction data testing to encompass taxpayers within the wider top 1,000 population who have not completed the GAT, noting that transaction testing is generally only required as part of top 100 taxpayer GST assurance reviews. The ATO’s response in this area will become clearer over time.
Banking, finance, and some types of insurance taxpayers are not required to perform a GAT reconciliation, as their activities predominantly involve input taxed supplies. Instead, the ATO conducts tailored GST data testing as part of its GST assurance reviews as set out in the ATO’s GST data tests guide for the financial services and insurance industry. Nevertheless, these taxpayers—whether preparing for SAGR obligations or GST assurance reviews—should proactively undertake GST data analytics to ensure that, for the relevant SAGR or GST assurance period, the correct amount of GST has been reported and paid. This approach provides greater confidence in compliance and supports a robust GST governance framework.
Material uncertain GST positions (Section E)
Taxpayers must disclose ‘material uncertain GST positions’ in a BAS during the SAGR period, that exceed $500,000 for top 100 taxpayers and $250,000 for top 1,000 taxpayers.
The ATO defines a ‘GST position’ as a determination regarding the classification of supplies or acquisitions—for example, whether a supply is taxable, input-taxed, or GST-free, or whether an acquisition is eligible for input tax credits or reduced input tax credits. An ‘uncertain GST position’ arises where the position taken is about as likely to be correct as incorrect, even if it is reasonably arguable, or is less likely to be correct than incorrect. This specifically includes positions that contradict ATO public advice and guidance, public rulings, private rulings issued to the taxpayer, applicable ATO Taxpayer Alerts, or positions classified as moderate or high risk under an ATO Practical Compliance Guideline.
There are two critical considerations when evaluating GST positions. First, assess whether the GST technical position is ‘uncertain’. If uncertainty is identified, determine whether it surpasses the materiality threshold applicable to the taxpayer.
As part of good GST governance, all taxpayers—whether preparing for SAGR obligations or GST assurance reviews—should document the technical basis for all GST positions adopted for material supplies and acquisitions. This documentation should clearly articulate whether each GST position is considered certain or uncertain, supported by relevant analysis. Further, for any GST positions that are identified as ‘uncertain’, taxpayers should assess whether the value of the GST position exceeds the applicable threshold and document this assessment. When quantifying the value of the GST position, similar arrangements or transactions should be aggregated and treated as a single GST position if the underlying facts and the applied GST treatment are the same or substantially similar, and a consistent conclusion has been reached regarding their GST treatment.
For any ‘material uncertain GST positions’ that are identified, taxpayers should anticipate potential scrutiny from the ATO. Accordingly, the technical basis for any uncertain GST positions should be robustly documented and substantiated—ideally through a reasonably arguable position paper, external advice, a second opinion, or contemporaneous engagement with the ATO.
All taxpayers should also include within their GST governance framework a process to identify and assess, in real time, whether new categories of supplies or acquisitions—such as new products or novel procurement types—constitute ‘uncertain GST positions’ that exceed relevant thresholds. Given the likelihood of detailed ATO scrutiny on the position taken, this process should mandate the escalation of such positions through the taxpayer’s tax risks escalation policy so that a timely assessment can be made of whether the position warrants formal support, such as a reasonably arguable position paper or the submission of a private binding ruling request, or some other form of ATO engagement. Taxpayers who already have tax risk escalation policies and tax risk registers should update these policies to ensure that they reference the thresholds relevant to material uncertain GST positions.
Material GST reporting errors or credits claimed in a later BAS (section F)
Taxpayers must disclose the following:
- ‘material GST reporting errors’ being errors affecting the GST net amount on their BASs during the four-year review period, which exceeds the threshold amounts noted above. Taxpayers must provide details on the amount, a description of the error, and how it has been rectified prospectively, and
- input tax credits (ITC) referable to earlier periods, defined as ITCs claimed in a BAS lodged during the period covered by the SAGR which were originally attributable to periods prior to that period, and which arise due to a change in the GST treatment of supplies or acquisitions, including changes relating to their creditable purpose under specific Divisions 11 or 70 of the GST Act.
According to the ATO, a ‘GST reporting error’ is a mistake made in working out your GST net amount on your BAS impacting periods within the four-year period of review that would, if it was the only mistake that you made, result in reporting or paying too much GST (credit error) or reporting or paying too little GST (debit error). Importantly, GST reporting errors that are identified are required to be disclosed, regardless of whether the taxpayer has corrected them or not. For example, this could include GST underclaims emerging from apportionment and/or employee expenses.
An example of an item you would need to disclose under this section include material changes to ITCs historically claimed due to changes to the apportionment method or apportionment rate. Further, some examples of items that you do not need to disclose under this section are:
- ITCs that are claimed late due to processing delays (i.e. ITCs attributed to the June 2025 tax period but were processed and claimed in July 2025 BAS) because there is no change in GST treatment, and
- Division 129 adjustments as they are not GST reporting errors or additional ITCs referable to earlier tax periods.
As part of good GST governance, all taxpayers—whether preparing for SAGR obligations or GST assurance reviews—should implement processes to identify and track reporting errors that are made, determine the best way to rectify the error such as amending a subsequent BAS, revising historical BAS, or making a voluntary disclosure. This process should also assess and document whether the material GST reporting error/ITCs claimed in a later BAS needs to be disclosed in the SAGR for the relevant period.
When GST errors are identified, or ITCs relating to prior periods are claimed late, taxpayers should be prepared to provide the ATO with a clear explanation for the error, particularly from a GST governance standpoint. It is important to determine whether the issue arose due to a breakdown in existing GST controls or the absence of a specific control to address the relevant GST risk. We suggest that this is documented in an internal file note or external advice at the time the error is identified. Taxpayers should also outline the corrective actions being implemented, including enhancements to GST controls, and describe the testing procedures that will be used to ensure these controls are effective. For instance, this may involve additional testing during the BAS preparation process or incorporating the issue into ongoing GST controls testing.
If the error leads to a voluntary disclosure or amendments to historical BAS, it is likely that the ATO will consider the taxpayer’s governance framework, remediation steps, and control enhancements when determining the application of penalties and interest. Robust documentation and proactive management of GST risks can therefore play a critical role in mitigating potential ATO sanctions.
The takeaway
The introduction of the SAGR marks a significant shift in annual compliance for Australia’s largest taxpayers. Navigating this new obligation requires not only a thorough understanding of the SAGR’s requirements but also a strategic approach to disclosure and documentation as each disclosure sends a message to the ATO regarding the taxpayer’s attitude to GST governance. Early planning, clear documentation, and a strategic approach to SAGR disclosures will help taxpayers meet ATO expectations and optimise future GST assurance outcomes.
Although Top 100 and Top 1,000 taxpayers who have not yet undergone a GST assurance review are not currently subject to SAGR obligations, these taxpayers should proactively consider the scope of future SAGR disclosures and ensure that they are ready for their future GST assurance reviews. Insufficient preparation now increases the risk of ATO recommendations, which may necessitate additional work when the first SAGR is required to be lodged following the review, as well as during the GST assurance review. There is no time like the present to start preparing.
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Matthew Strauch
Mark Simpson
Andrew Howe
Shagun Thakur
Mark De Luca
Priyanka Panchal
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