Advocating for good tax governance can be tough, but worth it: EY

Australian branches of multinational firms often find themselves having to explain the benefits of good tax governance within Australia’s taxation system, EY tax advisors Gina Wang and Karen Krautz told the 2025 NSW Tax Forum last Thursday.

“Offshore stakeholders in a multinational organization could include Global Head of Tax, group CFO, group tax, group finance functions, basically anyone who has a role in oversight of Australian tax matters,” Krautz said.

“In our experience, there's often a need to educate these overseas stakeholders on the ATO expectations in this space, because they're often not used to it, and that's certainly the case if in their jurisdiction, tax governance isn't as much of a priority.”

Good tax governance can bring benefits including better internal coordination, bolstered ESG credentials and a lighter-touch approach from the ATO, shifting companies’ time and resources from simple compliance to more strategic matters, the EY tax practitioners said.

However, multinational stakeholders often did not understand the depth of the Australian approach, including the ATO’s ‘justified trust’ program which reviewed companies’ tax governance practices, and rewarded compliant companies with less scrutiny over time.

Companies can achieve high ATO assurance ratings following a review wherein the tax authorities consider a firm’s tax governance framework, tax risks flagged to the market, significant new transactions and why accounting and tax results may vary.

“Top 100 taxpayers who achieve a minimum stage two tax governance rating and overall high assurance rating, should enter a monitoring and maintenance phase,” Wang explained.

“During this phase, the ATO will ordinarily conduct a less intensive review process and will only monitor disclosures and tax outcomes over the next three income years.”

Krautz encouraged Australian branches to highlight the benefits that tax governance could bring in terms of regulatory and operational efficiency, in order to get offshore stakeholders on board with their tax governance efforts.

“You really need to inform [multinational stakeholders] as to what you're trying to achieve, and what the ramifications are if you don't engage in good tax governance. You need to bring them up to speed and bring them on that journey with you,” Krautz said.

“If there's a lot of ATO scrutiny that can have a drain on the time and resources of the [Australian] finance function.”

Australia’s new public country-by-country reporting laws, which are set to publicly display multinational companies’ tax affairs across jurisdictions, will necessitate further coordination and understanding between Australian branches and their offshore counterparts.

As transparency becomes more embedded in Australia’s tax system, good tax governance is set to become a critical component of a business’s ESG credentials.

“The ATO has suggested that tax transparency is a key strategy for enhancing an organisation's ESG credentials by demonstrating social responsibility through contributing fairly to communities in which they operate,” Wang said.

“An organisation might even leverage positive tax governance ratings and overall assurance ratings under the ATO assurance programs to bolster its ESG credentials.”

The tax practitioners urged Australian branches of multinational firms to ensure that they had adequate systems in place to adhere to incoming mandatory country-by-country reporting rules.

Firms that were proactive about tax governance - not reactive - were best-placed to see operational benefits and avoid snags when navigating conversations with offshore stakeholders, they said.

“Engage stakeholders early in the piece. And I can't stress this one enough. It's never too early to have a conversation with your stakeholders on governance in our experience,” Krautz said.

“Those are the organizations who start to see those other benefits that we were talking about before, and they're best placed once the ATO does come knocking.”