GST treatment errors identified among Top 1,000

The Tax Office has released its GST findings from assurance reviews of the Top 1,000 public and multinational businesses.

From 1 July 2019 to 30 June 2026, the ATO completed 1,034 reviews, covering 860 taxpayers. In the 2025–26 financial year, it completed 141 reviews, of which 118 were for taxpayers who had not previously had an assurance review.

Of the taxpayers currently in the Top 1,000 program, as of 30 June 2026, the ATO has completed 822 reviews, covering 584 taxpayers.

The ATO reviewed the GST treatment of the taxpayer’s business activities, particularly significant and new transactions, as well as risks or concerns flagged to the market, to determine if they are present.

Its assurance activities under the three-tier model considered behaviours, events, and focus areas identified within the public and multinational business three-tier model as driving tax performance, specifically correct reporting.

For the treatment and reporting for GST purposes, the focus areas include:

• Treatment of significant or unusual transactions involving financial supplies (e.g. financial acquisition threshold).
• Treatment applied by financial services, investment and insurance industries (e.g. GST apportionment, reduced input tax credits, reverse charge).
• GST classification of food and health products.
• Reporting of GST on low-value imported goods and inbound intangible supplies by offshore entities.
• Treatment applied to real property transactions and accommodation.

For GST governance, systems, and controls, the focus is on effective systems and controls to ensure accurate GST reporting and invoice issuance.

In the food and health products category, the ATO said it continues to see taxpayers incorrectly classifying taxable supplies as GST-free.

Indeed, one-third (33 per cent) of the issues that received a separate assurance rating for this risk area in the 2025–26 financial year received a low or red flag assurance rating. This rating indicates that the ATO has concerns about non-compliance with GST law.

The wrong product classification is driven by a number of factors, the ATO said, including insufficient governance controls around onboarding new products, failure to carry out regular reviews of the product master list to identify appropriate treatment, wrong interpretation of the GST legislation relating to the products, and relying on the GST treatment by the supplier without undertaking due diligence to determine the correct GST classification of the products.

Furthermore, the ATO identified GST treatment errors of financial supplies. In FY26, 10 per cent of issues that received a separate assurance rating for this risk area got a low or red flag assurance rating.

This was related to at least one of several factors, including:

• The application of the financial acquisition threshold (FAT) to determine whether input tax credits can be recovered on costs, specifically in relation to mergers, demergers, company acquisitions, initial public offerings or other similar activities involving share transactions.
• Claiming reduced input tax credits (RITCs) on costs without fully assessing eligibility, including mixed supplies under IT outsourcing contracts.
• Failure to apply the reverse charge provisions to services provided by overseas-based branches or related entities, such as IT and administration support services.
• Allocation of relevant costs to merger and acquisitions (M&A) transactions.

“We encourage taxpayers, specifically those who do not make routine input taxed supplies, to focus on the application of the FAT in relation to one-off merger and acquisition type transactions, and to input tax credit entitlements,” the ATO said.

Real property transactions were another area of concern, with 15 per cent of issues that received a separate assurance rating for this risk area in the 2025–26 financial year obtaining a low or red flag assurance rating.

The ATO recently published its intention to develop industry-specific GST public advice and guidance for build-to-rent residential property developments. It said the draft update will clarify how existing law applies to modern build-to-rent developments and help taxpayers determine whether their premises are residential or commercial residential.

The ATO’s analysis of differences between BAS outcomes and accounting outcomes found that most of the current Top 1,000 taxpayers achieved a high assurance rating for the GST analytical tool (GAT).

It showed that 84 per cent of taxpayers reviewed in FY26 who were applying the GAT could explain any differences with reference to objective evidence.

As of 30 June 2026, 78 per cent of the group received high assurance while only 1 per cent received a red flag.

Overall, the ATO saw an increase in the number of taxpayers for whom it has assurance that they have paid the right amount of GST. Almost half (46 per cent) of current Top 1,000 taxpayers received high assurance as at their latest review (with $7 billion paid in GST in 2023–24), while only 5 per cent received a low assurance rating.

In the 2025–26 financial year, 54 per cent of reviews received a high assurance rating, higher than the result for all reviews to date.