Big business must prepare for ‘imminent’ GloBE reforms, warns RSM
Legislation to implement a global and domestic minimum tax looks set to apply from 1 January 2024 after a Senate committee recommended the bill be passed.
The Senate Economics Legislation Committee recommended three bills to implement a 15 per cent global and minimum tax be passed by Parliament.
The bills enact a 15 per cent global minimum tax and domestic minimum tax for multinational enterprises operating in Australia with an annual global revenue of at least €750 million (approximately $1.2 billion).
The reforms are part of the Global Anti-Base Erosion Model Rules (GlobBE rules) established by the OECD to reform international taxation rules and ensure that multinational enterprises pay a fair share of tax wherever they operate and generate profits.
The bills were referred to the committee in July, with the committee handing down its recommendation in a report on Wednesday.
With a number of the groups in the consultation raising concerns about the complexity of the measures, the committee noted that the ATO has engaged with affected entities on the measures and will seek to ensure that compliance costs are minimised.
"The committee further notes that the ATO has confirmed their collaboration with tax administrators around the world, and that this should ensure that multinational enterprises are not required to duplicate reporting and other compliance tasks across jurisdictions," the report said.
The committee said the bills will contribute to the series of broader reforms to multinational tax payments and transparency that have been progressed in this parliament.
RSM Australia said the bills receiving the green light from the committee means it is compliance crunch time for multinational enterprises.
RSM Australia national tax technical director Liam Telford said it was frustrating that despite the rules substantially coming into effect from the start of 2024, the draft legislation was not released for consultation until well after that date.
“Subject to safe harbour rules, almost all multinationals that meet the rolling revenue threshold and have an Australian ultimate parent entity, intermediate company or an end-of-the-line subsidiary, will be required to calculate their income and determine their effective rate of tax paid under the GloBE rules," Telford said.
Telford noted that those who come under the 15 per cent will be obligated to pay a top-up tax to the Australian government.
“Given Australia’s high corporate tax rate, the magnitude of top-up revenue is likely to be low for the Australian Government – estimated to be less than 0.2 per cent of annual corporate tax revenue – however the compliance burden for businesses will balloon significantly," he said.
RSM Australia corporate tax partner, Damian Sellitti, warned that while the transitional country-by-country safe harbour (CbCR TSH) rules could reduce compliance time and costs – and a top-up tax payment – these should not be assumed.
“What we have found is that some MNEs have a false sense of security around the availability of the CbCR TSH rules and could be taken off guard if further work is not undertaken to confirm eligibility,” Sellitti said.
“Notwithstanding that the first lodgement obligations are not due until 30 June 2026, MNEs need to be mindful that if the CbCR TSH does not apply, the compliance burden significantly ramps up.
“This is particularly important given that Treasury has flagged that these new obligations will be subject to the Significant Global Entity penalty regime where one late lodgement could result in penalties up to $782,500."
Sellitti cautioned that the level of preparation that is required should not be underestimated.
"For example, if the CbCR TSH rules are not available it could potentially require significant global IT upgrades to effectively synthesise and report on more than 140 unique data points from multiple sources like tax provision and CbCR systems, legal entity management tools and ERP systems," he said.
“The requisite change is, in substance, monumental.”
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