Publish Date
Feb 29, 2024
Expertise
Overview
On February 12, 2024, the Australian government released a new exposure draft (ED) proposing public country-by-country (CbC) reporting requirements for certain multinational entities operating in Australia. These requirements will apply to reporting periods commencing on or after July 1, 2024, and are distinct from the existing private CbC reporting provisions under subdivision 815-E of the Income Tax Assessment Act 1997.
Key Changes from Previous ED
Compared to the April 2023 ED, the new ED reflects the government’s intent to align more closely with the European Union (EU) public CbC reporting directive. Notable changes include:
Removal of certain disclosures: The ED removes several disclosures proposed in the previous ED, including:
Related party expenses
Lists of tangible and intangible assets
Book value of intangible assets (but not tangible assets)
Effective tax rate disclosures
Jurisdictional disaggregation: The ED retains the requirement for disaggregated reporting for Australia and 41 specified jurisdictions. However, reporting parents can now voluntarily choose to report disaggregated information for all jurisdictions.
Information to be Published
General Information:
Name of the CbC reporting parent
Names of each entity in the CbC reporting group
Description of the CbC reporting group’s approach to tax
Jurisdictional Information:
For Australia and specified jurisdictions:
Name of the jurisdiction
Description of main business activities
Number of employees (full-time equivalent)
Revenue from unrelated parties
Revenue from related parties (not tax residents)
Profit or loss before income tax
Book value of tangible assets
Income tax paid (cash basis)
Income tax accrued (current year)
Reason for difference between income tax accrued and due
Currency applied
For other jurisdictions (optional disaggregation):
Aggregate data for the above items
Description of the main business activities
Data Sources and Reporting Period
The information must be sourced from audited consolidated financial statements. If these statements are not available, the information must be based on amounts that would have been included had the entity been a listed company.
The reporting period is the period for which audited consolidated financial statements are prepared. If such statements are not prepared, the reporting period is the period for which they would have been prepared if the entity were a listed company.
Publication Process
The CbC reporting parent must provide the information to the Commissioner of Taxation in the approved form within 12 months of the end of the reporting period. The Commissioner is then responsible for publishing the information on an Australian government website as soon as practicable.
Corrections and Penalties
Entities must correct material errors within 28 days of becoming aware of them. There are penalties for failing to publish the required information on time or for publishing incorrect information.
Other Important Considerations
Exemptions: The Commissioner has the power to exempt entities or classes of entities from the reporting requirements in limited circumstances.
Threshold: Entities are only subject to the reporting requirements if their aggregated turnover includes at least AUD 10 million of Australian-sourced income.
Interactions with Other Regimes: The ED notes that the reporting requirements may interact with other CBC reporting regimes, such as those of the OECD and the EU. Entities should consider the potential overlap and ensure compliance with all applicable requirements.
Enforcement and Penalties
Failure to comply with reporting requirements can result in substantial penalties. Australian resident entities are subject to the penalties under section 8E of the Taxation Administration Act 1953 (TAA) if they commit an offence under section 8C of the TAA by refusing or failing to comply with their obligation to publish the selected tax information. The draft legislation includes a proposed new penalty provision that applies to entities that fail to “publish” information on time as required under this regime. The amount of the penalty is 500 penalty units for each 28 days or part thereof that a document is late, up to a maximum of 2,500 penalty units. Based on the current penalty unit value, this penalty ranges from AU$156,500 for up to 28 days late to a maximum of AU$782,500 for a document lodged more than 112 days late.
Additional Considerations
The explanatory materials accompanying the draft legislation emphasises that the proposed measures differ from Directive (EU) 2021/2101 in several areas. These include:
The requirement for entities to describe their approach to tax.
The designated list of 41 specified jurisdictions for which data must be published on a jurisdiction-by-jurisdiction basis.
The CbC reporting parent will fulfil its requirement to publish the requisite tax information by providing the information in the approved form to the ATO.
The draft legislation is subject to consultation and may undergo changes. Stakeholders are advised to monitor its progress over the coming months. Considerations regarding the interactions of these measures with existing and proposed reporting requirements, such as OECD’s “Pillar Two” changes, are also recommended at this stage.
Recommendations
With a proposed start date of 1 July 2024, it is recommended that companies prepare now and review their systems and processes for obtaining and collating the required disclosures. This also provides companies with a good opportunity to test out their tax governance processes.
For any immediate questions or concerns, or to discuss your specific situation — please do not hesitate to reach out to our A&M Tax team for help.
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