On April 6th, 2023, the Australian Treasury announced a transparency measure for MNEs to prepare for public release certain tax information on a country‑by‑country basis and a statement on their approach to taxation. If the law passes, public CbCR would be required for the 2023-24 and later income years.
Who is in scope?
The requirement to publish selected tax information applies to entities that are a CbC reporting parent and:
- if the CbC reporting parent is a company with a global income of AUD $1 Billion, it is a constitutional corporation; or
- if the CbC reporting parent is a trust, each of the trustees is a constitutional corporation; or
- if the CbC reporting parent is a partnership, each of the partners is a constitutional corporation.
In addition, the CbC reporting parent is only required to report in relation to an income year if:
- they are a CbC reporting parent for the income year; and
- they are a member of a CbC reporting group at any time during the income year; and
- at any point during the income year, they, or a member of their CbC reporting group, is an Australian resident or foreign resident with an Australian permanent establishment.
Information to be published
The CbC reporting parent is required to publish the names of each entity in the CbC reporting group and a description of the group’s approach to tax. In addition, for each jurisdiction the CbC reporting group operates in, the CbC reporting parent must publish, at a group level:
- a description of main business activities;
- number of employees;
- revenue from unrelated parties;
- revenue from related parties;
- expenses from related party transactions;
- profit and loss before income tax;
- a list (including the value of) intangible assets; a list (including the value of) tangible assets;
- income tax paid (on cash basis);
- income tax accrued (current year);
- effective tax rate;
- the reasons for the difference between income tax accrued (current year) and the amount of income tax due if the income tax rate applicable to the jurisdiction were applied to profit and loss before income tax; and
- the currency used in calculating and presenting the above information.
Publication
The Australian Exposure Draft requires the CbC reporting parent to provide the information to the Australian Commissioner of Taxation in the agreed form with the purpose of it being made public. According to the Draft Legislation, the Commissioner is then responsible for making the information available on an Australian government website.
Possible penalties
Under section 8C of the Taxation Administration Act (TAA) 1953, if Australian resident entities fail to comply with their obligation to publish the selected tax information, they may be subject to penalties under section 8E, starting at 20 penalty units (AUD $275 per unit, AUD $5,500 total), which can be extended to up to 12 months of imprisonment.
For further consultation on Australia’s public CbCR implementation, please contact us.