Identifying taxpayers suitable for an ACA Risk Differentiation Framework 3.5 The compliance strategy for large corporate taxpayers is based on a risk‐management approach that the ATO has adopted to form a view of relative taxpayer risk of noncompliance and determine the intensity of its compliance response in a coherent and considered way. The relative risk profile of the population of large corporate taxpayers is assessed primarily through the Risk Differentiation Framework (RDF), which is a risk modelling tool. In assessing risk, the RDF considers the likelihood of a taxpayer’s noncompliance in meeting their tax obligations and consequence of noncompliance on tax revenue, given the turnover of the taxpayer, influence on other taxpayers and impact on community confidence. 3.6 Using the RDF, the ATO places large corporate taxpayers into one of four broad risk categories or quadrants, according to likelihood and consequence risk Positioning of ACAs within the ATO’s Compliance Framework ANAO Report No 2014–15 Annual Compliance Arrangements with Large Corporate Taxpayers 57 ratings. Figure 3.1 shows the four categories in the RDF, and the number of large corporate taxpayers in each category in 2013–14. 76 Figure 3.1: Risk Differentiation Framework for large corporate taxpayers, 2013–14 Co ns eq ue nc e of n on -c om pl ia nc e Likelihood of non-compliance Key taxpayers 158 – 11% CONTINUOUS MONITORING Compliance activities may include annual compliance arrangements, pre-lodgement compliance reviews, key taxpayer reviews, and reportable tax position schedules Lower-risk taxpayers 925 – 66% PERIODIC MONITORING Compliance activities may include monitoring via risk filters and qualitative intelligence, letters and visits
