Large Australian entities cautioned on CbC reporting ‘quirk’
Australian entities with more than $1 billion in aggregate turnover but no overseas related parties will likely be captured under the new disclosure requirements, warns BDO.
Mandatory public country-by-country reporting for multinationals will likely apply to Australian entities without overseas operations where they have more than $1 billion in aggregate turnover, BDO has reminded large Australian entities.
The bill to implement the new reporting obligations remains before the Senate after it was referred to the Senate Economics Legislation Committee for report in early August.
BDO transfer pricing partner, Natalya Marenina, said the legislation does not appear to contain an exemption for these kinds of entities.
“An interesting quirk that we’ve noticed is that essentially Australian groups without overseas operations do not appear to be exempt,” Marenina said.
Previously, under the existing country-by-country reporting, Australian entities with no foreign operations or subsidiaries were exempt.
“That means they may need to prepare all of it for the first time which will require additional effort, Marenina said.
Marenina said it isn’t clear exactly how many companies would fall into the group with over $1 billion in aggregate turnover for the relevant year and at least $10 million of that income is Australia-sourced.
Australian entities with an overseas CbC reporting parent will also face potential challenges with the new reporting requirements.
Marenina said new reporting requirements apply to CbC reporting parents with $10 million or more of Australia-sourced aggregated turnover in the current year.
“This could be a significant burden for an overseas entity where the group is headquartered outside of Australia,” she said.
As the reporting requirements are for CbC reporting parents, Marenina said it remains to be seen how the ATO will administer penalties for late lodgment or non-compliance when the reporting parent is an entity domiciled outside of Australia.
“There is no guidance on this yet, but there is a strong possibility that penalties will be applied to the Australian entity when the CbC reporting parent is not located in Australia,” she said.
This could mean that where groups are headquartered outside of Australia, it will likely be left to the Australian subsidiary to manage.
“This is obviously not an ideal situation. In some cases, groups have different reporting requirements and a different understanding of what Australia requires,” she said.
“Where that happens, it can be tough to manage because our penalties are so high.”
Companies required to publish under the reporting requirements will also need to be prepared to interpret what their data means.
“This is the first time where detailed global information has been released to the public. Once it’s released to the ATO, it will be published on a government website,” Marenina said.
“When you receive a lot of data, you need to have a lot of skill to be able to analyse it and often it needs to be a qualified professional.
“For everyone who needs to publish this information, I would recommend looking at the data and thinking about what stories it tells and if the story [isn’t clear] then you may want to publish information on your website.”
Marenina said companies must be “prepared to interpret the information” as the way the public or press interpret it may be quite different.
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