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Justified Trust

The ATO has adopted the ‘Justified Trust’ concept from the Organisation for Economic Cooperation and Development (OECD) and have applied the notion to its engagements with large organisations and private groups.

What is ‘Justified Trust’?

Justified Trust is focused on developing confidence between the ATO (as a representative of the wider community) and the taxpayer by integrating the management of tax risks into corporate governance considerations. Good tax governance assists the ATO in ‘trusting’ that the correct amount of tax has been paid and facilitates a streamlined approach to compliance.

The ATO’s Tax Avoidance Taskforce has applied the Justified Trust methodology to conduct reviews on various taxpayers with a focus on the ‘top 100’ and ‘top 1000’ public groups and ‘top 500’, ‘top 5,000’ and ‘medium and emerging enterprise’ private groups. The reviews focus on whether taxpayers are paying the correct amount of tax and have appropriate tax governance processes.

Taxpayers, in particular those falling into the ATO’s focus groups should look to implement a robust tax governance framework which is well documented in the event of a review.

How does the ATO apply Justified Trust to its reviews?

In its reviews, the ATO will consider four core areas considered important to obtaining Justified Trust.

Tax governance

The ATO will seek to understand the taxpayers’ tax governance framework through:

  • assessing the appropriateness of the framework in light of the taxpayer’s unique attributes such as size, complexity, industry and history; and
  • analysing the processes used to identify tax risks and prepare income tax returns.

Tax risks flagged to market

The ATO will assess whether risks it has communicated to the market (such as through Taxpayer alerts, Practical Compliance Guidelines and Public Rulings) are present. If such risks are identified, the ATO will engage further to:

  • understand how these arose; and
  • assure correct tax treatment, reporting and payment.

New and significant transactions

The ATO seeks to understand current business activities and review new or significant transactions from a tax perspective.

Variations in tax and accounting treatments

The ATO will analyse variances between the tax and accounting treatments adopted by taxpayers and whether such practices are consistent with business activity and industry practice.

Target Groups

There are three categories of taxpayers who the ATO currently focus on.

'Top 500 private groups'

The Top 500 include private groups with:

  • Over $350 million in turnover, regardless of asset value;
  • Over $500 million in net assets, regardless of turnover;
  • Over $100 million in turnover and over $250 million in net assets;
  • That involve a company with total business income of over $250 million and are included in the large company tax gap population; or
  • Market leaders or attract the ATO’s specific interest.

Groups within the Top 500 can expect tailored engagements with the ATO using the ‘Justified Trust’ methodology. Based on these engagements, Top 500 groups are classified as follows:


Top 500 groups considered to have attained Justified Trust will be classified as ‘partners’. The ATO has confidence that these groups are paying the correct amount of tax, and would reduce the intensity of ATO engagements – only verifying significant new transactions and discussing material changes to these groups during the three year ‘monitoring and maintenance phase’. 


Top 500 groups in the ‘encouraging’ category are able to demonstrate a basic level of compliance, but some non-compliances or other issues (including the sufficiency of tax governance) have been identified through the ATO’s review. The ATO will engage with these groups to encourage them to address concerns and seek greater transparency.


This category includes groups who are considered to lack transparency and adopt aggressive approaches to managing their tax affairs. These groups may experience intensive interaction with the ATO, including the use of formal information gathering powers and audits.

‘Next 5,000’

The Next 5,000 includes individuals and groups linked to Australian tax residents not already covered by the Top 500 program, who, together with their associates, control wealth of more than $50 million.

Next 5,000 groups can expect to be subject to a streamlined assurance review covering the two most recent income years. The ATO applies the Justified Trust methodology to obtain assurance that the group has reported and paid the correct amount of tax.

Next 5,000 groups are likely less sophisticated than Top 500 groups and may not have an understanding of the ATO’s expectations in regards to tax governance. Next 5,000 Groups should focus on reviewing existing protocols, and if necessary develop and implement new tax governance frameworks.

‘Medium and emerging’ private groups

Medium and emerging private groups are:

  • groups linked to Australian tax residents who, together with their associates, control wealth between $5-$50 million; and
  • businesses with an annual turnover of more than $10 million which are not public or foreign owned and not linked to a high wealth private group.

The ATO estimates that medium and emerging private groups represent about 97% of the total private group population, and it will focus on engaging with larger or high risk private groups within this category.

Tax Governance Framework

Tax governance is one of the core review areas within the Justified Trust methodology. In the review process, the ATO will look to confirm the existence and application of a groups tax governance framework, which people at various levels and functions within the group should be aware of and understand.

Whilst the ATO assesses the appropriateness of a group’s tax governance framework in light of factors unique to it (such as structure, industry and history), there is an expectation that all groups incorporate basic principles of effective tax governance. 

These are:

  • accountable management and oversight of tax obligations;
  • appropriate processes to ensure compliance with tax obligations as well as to identify, assess and mitigate actual or potential tax risks;
  • clearly defined arrangements for escalating tax issues and seeking advice;
  • integrity in reporting;
  • professional and productive working relationship with the ATO;
  • timely lodgements and payments; and
  • ethical and responsible behaviour.

Preparing for a Review

The ATO will generally request the following as part of a justified trust review:

  • tax returns over the review period and information used to prepare these;
  • information about the group structure, relevant companies and their businesses; and
  • the group’s tax governance documents and framework.

All taxpayers should prepare for reviews by performing self-checks to identify any potential inconsistencies, ensure justifications for all positions taken and consider corrective action where appropriate.

How we can assist you

How we can assist you

Our team of experienced tax practitioners are well positioned to help you prepare for justified trust reviews, as well as any relevant engagements with the ATO.

Services we offer include:

  • assistance in navigating a justified trust review, including responding to requests for information, making disclosures and attending meetings
  • advice on design and implementation of tax corporate governance policies
  • overall or issue specific tax-health checks to identify tax risk exposures, gather evidence to support positions adopted and if necessary assist with strategy around corrective action
  • making voluntary disclosures
  • providing advice on how to manage and mitigate risks identified as medium or high risk as a result of a justified trust review.