CPA calls for guidance on timeline for Pillar Two reforms
Specific guidance as to when the Pillar Two rules will be substantially enacted in Australia is urgently needed to help entities prepare for the new financial reporting obligations, CPA Australia has said.
CPA Australia has called for specific and timely guidance to be issued by the Australian Accounting Standards Board (AASB) as to when the Pillar Two rules are substantively enacted in Australia to provide more certainty to the estimated 5,000 entities that will be required to report.
The Pillar Two rules are part of the OECD’s Two Pillar Solution and implement a global minimum tax of 15 per cent.
The bill to implement the framework for a global and domestic minimum tax was introduced earlier this month and is still before Parliament.
“The primary legislation includes the Assessment Bill, which sets out the framework for the entities that are liable to top-up tax consistent with the Organisation for Economic Co-operation and Development (OECD) GloBE rules,” CPA Australia said.
“It is intended that the substantive computation of top-up tax, consistent with the OECD GloBE Rules is to be determined via rules made under the Minister’s rule making power.”
CPA Australia said it understands that the subordinate legislation will be made after primary legislation has been enacted.
“It is unclear if the complete legislative package (both primary and secondary) will be enacted by December 2024,” CPA Australia said.
“Taxpayers with financial year-ends on 31 December will need to consider their financial reporting disclosures for Pillar Two at the reporting date.
“Since the substantive rules will be in the subordinate legislation, and its creation depends on the enactment of the primary legislation, it is important for the government to collaborate with the AASB to provide specific and timely guidance on when the Pillar Two legislation is substantively enacted.”
The professional body has also urged the government to consider the impact of compliance costs associated with the introduction of a global and domestic minimum tax in Australia.
It noted that around 5,000 multinationals fall within the scope of Pillar Two. However, only approximately 140 Australian-headquartered multinationals or Australian subsidiaries of foreign multinationals are likely to be subject to top-up taxes under the Pillar Two rules.
“We recommend the government considers the compliance cost implications and explore opportunities to reduce compliance burdens,” CPA Australia said.
“For example, efficiencies could be achieved through the amalgamation of the Australian IIR/UTPR and Domestic Minimum Tax returns into a single form filed by one entity on behalf of all Australian constituent entities rather than by each constituent entity.
“The Commissioner is allowed to specify circumstances in which an entity is not required to lodge, and we hope to see further administrative guidance in this area to facilitate streamlined filing for Australian tax consolidated groups.”
CPA Australia said there is also a need to further clarify how the Australian tax consolidation rules in Part 3-90 of the Income Tax Assessment Act 1997 interact with the Australian Pillar Two rules.
“For example, there is a need for clarity regarding the interaction between section 6-55 of the subordinate legislation and the Australian tax consolidation rules, particularly concerning the acquisition or disposal of a controlling interest in a head company of a tax consolidated group,” it said.
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