Revised draft legislation released for country-by-country reporting
The revised exposure draft incorporates stakeholder feedback and delays the start date of the measures until 1 July 2024.
Treasury has released a revised exposure draft for the country-by-country reporting (CbC) requirements which will significantly increase the tax information that multinational groups need to disclose to the public.
The reforms impact both Australian-headquartered multinational groups but also foreign-owned multinational groups with operations in Australia over a certain size.
Under the measures, certain large multinationals will be required to publicly disclose selected tax information. This information will be required on a CbC basis for specified jurisdictions and on either a CbC basis or an aggregated basis for the rest of the world.
The revised exposure draft follows the release of draft legislation released in April last year, which was originally intended to apply for the 2023–24 financial year.
Following feedback from stakeholders, the government announced it would delay the start date of the measures and revise the disclosure requirements in June last year.
Key changes from original exposure draft
In a recent article, KPMG said the latest draft takes into consideration stakeholder feedback from the previous draft legislation in three key areas.
It removes the Australian-specific data requirements that were originally included such as details of intangibles, lists of tangible assets and Pillar Two effective tax rates.
KPMG said this will ensure the information requirements for disclosure are now more closely aligned to the private OECD cBc reporting requirements, GRI 207-1 and GRI 207-4.
The revised reforms also allow required data to be aggregated for all foreign jurisdictions that are not on a list of 41 specified jurisdictions.
This list is closely aligned to the International Dealings Schedule specified jurisdictions list excluding those in the European Union.
The latest exposure draft also introduces a de minimus threshold to MNE groups which means that a CbC reporting parent will not be subject to reporting obligation if less than $10 million of the group’s global income for the income year is Australian-sourced income.
KPMG said while the approach adopted under the revised proposals strikes a better balance between transparency and stakeholders’ key concerns arising from the previous ED, the timeline for the reforms will still be challenging.
“There remains a notable challenge in the timeframe for submitting the public CbC report within 12 months of year end, considering the simultaneous preparation and submission requirements for existing private OECD CbC reports,” it said.
The big four firm said multinational groups will need to compare the information requirements based on their current (non-public) OECD CbC reporting to the revenue authorities and any other country by country reporting standards that have been applied, such as GRI 207-4.
“They will also need to determine if current tax reporting systems can be aligned to produce information that complies with all CbC reporting requirements and identify where gaps need to be filled, noting that this can take time to resolve,” it said.
“MNE groups will also need to review whether their current tax strategy for the group meets the requirements under GRI 207-1 Approach to Tax, aligned to their broader ESG strategy and ensure this is revisited from both a content and governance perspective given such information will be made public.”
Treasury is currently seeking feedback on the draft legislation and whether it achieves the policy intent of improving tax transparency.
The draft explanatory materials said the proposed tax transparency measures complement the government’s broader regulatory mix to improve corporate disclosures and reflect the shifting public sentiment for greater transparency and accountability on corporate activity, particularly from large businesses.
"The shifting attitude for enhanced corporate disclosures is observed across the corporate governance landscape, including environmental and sustainability marketing claims and on climate related financial disclosures,” the draft EM stated.
