What is it?
In early October 2024, the ATO indicated that it would be introducing a new 'Supplementary Annual GST Return' (SAGR) that would need to be lodged annually by large public and multinational taxpayers in the Top 100 or Top 1,000 Justified Trust programs. On 9 October 2024, the ATO provided specifics as to the nature of the SAGR, who will be required to lodge, and what the ATO will use information in the SAGR for. Each of these are discussed below.
Nature of the SAGR
The SAGR is an annual GST return that will need to be lodged in addition to existing GST compliance obligations (i.e. Business Activity Statements, Justified Trust Monitor and Maintain obligations, etc). SAGR's will typically need to be lodged each of the financial years between Justified Trust reviews involving a GST component (i.e. Streamlined Assurance Reviews / Combined Assurance Reviews).
The type of information taxpayers will need to provide is quite broad, and includes providing responses on:
- ATO Recommendations: How the taxpayer has actioned ATO recommendations, areas of low assurance or red flags raised as part of the prior Justified Trust review;
- GST Governance: Whether the taxpayer has maintained or improved its level of GST governance since the last Justified Trust review, and whether there has been any material business or systems changes since last review impacting GST reporting.
- GST Reconciliation: Whether the taxpayer has undertaken any reconciliation between its audited financial statements, and its annualised BAS's. This would most commonly be done by utilising the ATO's GST Analytical Tool (GAT);
- Uncertain GST positions: Whether the taxpayer has taken any material uncertain GST positions during the period between Justified Trust reviews;
- GST errors: Details of any GST errors identified during the period, and how they have been rectified.
Usefully, the ATO has outlined fairly detailed instructions (including examples) on its website as to how to respond to each of the questions in the GAT, which are broadly centred around the points above.
While taxpayers will not be required to provide any documentation supporting the responses provided as part of a SAGR, they will be required to hold such evidence (and likely provide it to the ATO as part of subsequent Justified Trust reviews).
Finally, the ATO acknowledges that Top 100 taxpayers are under an expectation to provide real-time disclosures as to material tax reporting or governance changes under the Top 100 Pre-lodgement Disclosures Framework (which covers GST). To the extent any disclosures are made in relation to GST under this Framework, responses in a SAGR can simply refer to those earlier disclosures.
Who needs to lodge, and when?
The SAGR is for a specific financial year, not for a specific tax period like a BAS. It will need to be lodged around 7 months after the end of the financial year.
Only taxpayers that have received a GST assurance rating through a Top 100 or Top 1,000 assurance review (i.e. Streamlined Assurance Review, Combined Assurance Review, etc) will need to lodge a SAGR. The first SAGR will need to be lodged for the financial year immediately following the financial year for which a GST assurance rating was received.
The ATO have indicated they will contact taxpayers that will need to lodge SAGR's, and specify the due date.
What will the ATO use the SAGR information for?
Broadly, the information is designed to assist the ATO to:
- Assess the extent to which it has confidence that GST has been correctly reported; and
- Determine the taxpayer's level of ongoing investment in GST governance.
The ATO's guidance indicates that the information will be used slightly differently, depending on whether the taxpayer is Top 100, or Top 1,000 population:
- For Top 100 taxpayers, the information will be used to inform the scope and intensity of future Justified Trust reviews (including Refresh Reviews) – however those reviews are certain to happen;
- For Top 1,000 taxpayers that have previously obtained overall medium or high assurance ratings for GST – the ATO may determine that a further GST assurance review is not required at all (or, a less intensive GST assurance review may be appropriate given the taxpayer's existing assurance rating).
It is currently unclear how the SAGR will interact with the ATO's expectation of the Justified Trust population in providing 'Monitor and Maintain' disclosures between Justified Trust reviews. There seems to be significant overlap, so it may eventuate that the 'Monitor and Maintain' expectation falls away – but this remains to be seen.
Finally, a SAGR that indicates that a taxpayer has not addressed ATO recommendations or risk areas from a prior review will most likely lead to earlier and/or more robust ATO reviews going forward. This further highlights the importance of addressing ATO recommendations.
So what do I need to do?
- Address ATO recommendations between reviews: this is the starting point for showing your commitment to the Justified Trust program, and typically will result in better GST governance/reporting outcomes in any case. If you decide not to adopt any of the ATO's recommendations, be sure to document why, having regard to the nature of your business.
- Be proactive: given that inevitably the ATO will ask for the 'objective evidence' relating to how GST was addressed as part of any material business changes or new transactions, collate the relevant evidence in real time. For example, say a new accounting software is implemented – gather the relevant reports or work done to confirm that GST reporting has been considered and assured as part of the implementation of the new system.
- Assess needs / impact: There will inevitably be a lot of work in addressing ATO recommendations and continually looking to improve the GST governance / control environment. An assessment of what changes will give the most 'bang for your buck' in terms of overall GST assurance rating should be done, so resources can focus on the things that are most likely to achieve a better outcome (and ideally, lighter touch reviews going forward).
- Financial statement reconciliation: In our experience, the ATO is increasingly pushing for taxpayers to adopt its GAT as an internal tool to assist in the reconciliation between audited financial statements, and annualised BAS data. We are seeing a lot of clients struggling with this, as it has not historically been mandatory as part of Justified Trust reviews, so early consideration may be needed ahead of a SAGR being due.
The SAGR is yet another GST compliance obligation for medium/large public and multinational taxpayers. Those who have undertaken a Justified Trust review in the past will know they take time and resources to respond to. In the past, that investment might have led to a medium/high rating, and meant several years before the next GST Justified Trust review. Now, there will be an annual process regardless of how high your GST rating was. Taxpayers should start preparing for this new reporting obligation.
Contact us to discuss any questions you may have.