【Tax】Australian Public Country-by-Country Reporting Rules -- Who is required?

For Australia's public country-by-country (CbC) reporting, the reporting entity is the public CbC reporting parent.  That means the global (ultimate) parent entity of the multination group that meets the Australian CbC/public CbC thresholds and has an Australian presence.

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    Australian public CbC regime

The filing obligation rests with the global parent, not the Australian subsidiary.  This parent is referred to as the Public CbC reporting parent.

Public CbC reporting differs from the usual confidential CbC reporting in Australia.

The ultimate parent of a group with consolidated global income of at least AUD 1 billion will be considered a Public "CbC reporting parent".

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     Key differences from the usual confidential CbC reporting regime 

The Australian Public CBC reporting rules require MNEs to publicly disclose certain detailed financial and tax information. These are generally designed to closely align to the confidential CBC reporting framework, though there are some notable differences:

• Filing obligation – The Public CBC filing obligation rests with the CBC reporting parent, whereas the confidential CBC reporting filing obligation sits with the Australian taxpayer. Affected groups should ensure they have registered their CBC reporting parent with the ATO when the forms and instructions become available.

• Public disclosure - Unlike the OECD rules, which are confidential, the Australian rules mandate public disclosure of the CBC report. 

• Consolidated financials - The data source for Public CBC must be the consolidated financial statements of the CBC reporting parent entity, whereas other regimes provide more flexibility to use other data. This is particularly important for groups that may not have consolidated financial statements already prepared.

• Specified countries reporting - Financial, tax, and headcount data must be reported separately for Australia and certain specified countries. The specified countries list currently covers 40 countries, including some countries with which Australia has a comprehensive international tax agreement, i.e. Singapore and Switzerland. For other jurisdictions, data can be aggregated.

• Tax approach statement - MNEs must include a statement about their approach to tax, including explanations for discrepancies between the tax expense and the headline tax rate in each jurisdiction

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     Key similarities with the usual confidential CbC reporting regime

• Applicable entities – The Public CBC regime aligns its definitions to the confidential CBC reporting threshold, applying the A$1 billion threshold for the annual global income of the CBC reporting parent and its constituent entities.

• Data points - The Public CBC regime has relatively consistent data points to the confidential CBC reporting regime, except for some noted differences.

• Deadline – A 12-month filing deadline is applicable to both the confidential and the new Public CBC regime.

• Exemptions – To align with OECD guidance, confidential CBC report exemptions can be approved by the Commissioner upon request. These commonly exist where the annual global income of the foreign CBC reporting parent is A$1 billion or more, but falls below the CBC reporting foreign currency threshold in the jurisdiction of the foreign CBC reporting parent. It is expected that the ATO will allow similar exemptions for Public CBC reporting, though more detailed guidance on exemptions is still pending

  
  

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      Key impacts

Multinational groups with operations in Australia will need to adapt to these new requirements, with some of the key impacts outlined below:

• Increased transparency - The public disclosure requirement means that sensitive financial and tax information will be available to the public, including competitors and tax authorities in other jurisdictions. This could lead to increased scrutiny and reputational risks, so groups should ensure they have performed a Public CBC Market Sensitivity Analysis.

• Compliance costs - Preparing the Public CBC report will likely involve additional compliance costs. Groups will need to ensure that their reporting systems can capture and report the required data accurately and in a timely manner.

• Penalties for non-compliance - It is important to ensure taxpayers have properly considered the applicable start date and reporting deadline, given the large penalties applicable for late filings in Australia. These penalties can reach A$825,000 for filings that are over 6 months late.

• Global coordination - Groups will need to ensure consistency in their global tax reporting to avoid unknown discrepancies arising from the confidential CBC reporting, Pillar 2 reporting and the new CBC reporting.

Disclaimer: This article is intended to provide general information only and does not constitute professional advice for specific circumstances.  It should not be relied upon as a substitute for tailored advice.

Source: ATO, RSM