Episode Transcript
[00:00:00] Speaker A: Foreign.
And welcome to our podcast series where we bring you insights into the latest developments in the global tax policy and controversy space. My name is David Letos and I'm an Executive Director in the transfer Pricing practice of A and M Australia based in Melbourne. Joining me today is my colleague Josh Johnson. Welcome Josh.
[00:00:25] Speaker B: Thanks David. Hi everyone.
[00:00:27] Speaker A: Josh is the Senior Director, also from our transfer pricing practice based in Sydney. On this episode we'll be discussing Australia's public country by country reporting regime, which is a key development in the context of global tax transparency that will have implications for a wide range of multinational groups. Today we'll touch on who's in scope of the measures, what's required under the new measures, and when the rules first apply.
We'll touch on some administrative items. Then to close, we'll leave you with some key takeaways and immediate considerations for potentially impacted groups.
So Josh, why don't you start by giving our listeners a brief background to the Australian public CBC reporting measures and perhaps how the measures differ from other CBC reporting requirements.
[00:01:09] Speaker B: Thanks David. Many of our listeners will be familiar with Australia's existing non public CBC reporting requirements, generally applicable for multinational groups with consolidated annual turnover of AUD1 billion or above. These requirements have operated for close to a decade, introduced as an outcome of the initial OECD BEPS project.
However, the Australian public CBC reporting measures are a new and separate set of reporting requirements which will operate in addition to the existing non public Australian requirements.
The new measures are also separate and distinct from any other public CBC reporting measures outside of Australia, such as the EU Directive on Public CBC Reporting. Hence, this is not just about publishing the existing group CBC report.
In terms of timing, the new public CBC reporting requirements apply to fiscal years starting on or after 1 July 2024 with the reported information due within 12 months of the applicable year end. In practice, this means that Global groups with 30 June year end will be the first impacted, with the year end at 30 June 2025 being the first year captured and the public CBC data due to be reported by 30 June 2026. This is approaching fast now David, we'll dive into what types of information need to be reported a bit later along with where that will be published. But I'll pause here and pass over to you to help answer the obvious question that I'm sure everyone is asking.
Do the rules apply to me?
[00:02:49] Speaker A: Thanks Josh. And this is a really important topic as there are very specific rules for determining whether an entity is in scope of the measures.
So the rules apply to an entity that is a CBC reporting parent, which is broadly an entity that's not an individual, is not controlled by another member of the group based on accounting principles and which has annual global income of 1 billion Australian dollars or more.
So the key point here is that the obligation falls on the parent of the group.
In addition, the CBC reporting parent must be a constitutional corporation which is broadly a trading or financial corporation formed in Australia or a foreign corporation.
And there are some specific further considerations in this context for trusts and partnerships.
Now, the reference to a constitutional corporation is an important feature of the rules as it seeks to define the rules in a way so that they may apply to foreign entities, given the reporting obligation falls on the CBC reporting parent.
Fortunately, there is a de minimis threshold to the rules applying, but this is still quite low. In short, CBC reporting parents are not required to publish if the aggregated turnover of the group includes less than $10 million Australian dollars of Australian sourced income.
Now, the parent is required to publish for a particular period where they were a CBC reporting parent at any stage during the preceding period. So we look to the prior year and at any point during the relevant period the parent or a member of the group is an Australian resident or a foreign resident with an Australian permanent establishment.
And just as a final point on scope, it's important to note that CBC reporting parents that are Australian residents can can still be within the rules if they have no foreign operations. So for large Australian only groups, it's still important to consider the rules.
So now that we've got a better idea of who's in scope of the rules. Josh, you mentioned the data requirements earlier. Can you walk us through these please?
[00:04:48] Speaker B: Yeah, absolutely. Thanks, David.
So for global groups that fall within the new public CBC rules, they'll be required to publicly disclose key information annually.
And that includes specific data on revenue, profit tax, related party revenues, headcount, types of activities of the global group, as well as certain other items.
This data needs to be provided on a jurisdictional basis for both Australia and certain countries specified by the ato.
Some key examples of these specified countries include Singapore, Hong Kong and Switzerland.
There are many others on the specified country list.
All other countries, which we'll refer to here as the non specified countries tax, financial and other data can be provided on an aggregated basis.
Now, for Australia and each of the ATO's specified countries, if there is a difference between accrued income tax and the headline company tax rate, an explanation of the reasons for the difference must be provided.
Lastly, a narrative statement on Global Group's approach to tax will also need to be provided. This is a unique requirement of the rules and one that is particularly important for group stakeholders to contemplate. Early source of the group's reporting data will also be a key item for Inscope entities to consider, particularly with a number of overlapping reporting regimes with potentially different data source requirements.
That includes the Australian public CBC, OECD CBC and Pillar 2.
[00:06:36] Speaker A: Yeah, thanks, Josh. And so there's potential for some onerous data gathering there, particularly for groups with operations in many of the ATO's specified countries.
So now we know what types of data will go into the public CBC report, what happens with the information once it's been submitted to the ato?
[00:06:55] Speaker B: Yeah, great question. Thanks, David.
So the public information will be published on an Australian Government website accessible to the public.
And that's why this has been quite a contentious issue since the measures were first proposed. It's also worth highlighting for our listeners that that the ATO have recently published for public consultation draft instructions on their website regarding the public CBC reporting requirements. The draft instructions provide some further practical guidance on various aspects of the requirements. The consultation period on the draft instructions runs through to 28 November 2025, so the instructions may be subject to change before being issued in final form. The ATO has also released an optional registration process for CBC reporting parents which is indicated to assist with facilitating communications with the ATO on public CBC matters, including matters such as requests for extensions or exemptions. So, something to keep in mind now, David, hopefully this has given our listeners a flavour of what types of information must be reported and where it will be published.
I pass back to you with a question.
Are there any exemptions available?
[00:08:12] Speaker A: Yes, Josh, there are, but these are quite limited and are framed as applying in exceptional circumstances.
So the rules provide the ATO Commissioner with the power to provide exemptions to a class of entities or specific entities in respect of all reporting for a particular period. So. So a full exemption or specific entities in respect of publishing specific kinds of information for a particular period. So a partial exemption.
And to further frame the Commissioner's discretion with respect to exemptions, the explanatory memorandum to the rules notes that it may be relevant for the Commissioner to consider whether disclosure of the information would impact national security, breach Australian law, or have substantial ramifications for the entity by revealing commercially sensitive information.
So that provides some specific framing around the potential for exemptions.
In addition, the ATO has also released a draft practice statement PSLA 2025D1, which provides further guidance on considerations relevant to the exercise of the Commissioner's exemption discretion.
So more specific guidance on the circumstances in which exemptions may or may not be provided, the process for seeking an exemption, and the information applicants should provide as part of their exemption application.
And I think it's worth noting that the draft Practice Statement reinforces the principle that exemptions are typically provided in limited and exceptional circumstances.
Now, the final version of the Practice Statement is expected later this year, so it will be important for potentially impacted groups to keep abreast of this guidance.
[00:09:55] Speaker B: So David, it seems fair to say that exemptions are going to be hard to come by, but perhaps could be worth exploring early for some groups.
As a follow on question, can I ask what are the implications of a late filing or not filing at all?
[00:10:12] Speaker A: Yeah, thanks Josh.
So there are penalties that can apply for late late or non lodgment or for failing to correct material errors in a timely manner.
These include some significant administrative penalties for late or non lodgement, which at current rates begin at 165,000 Australian dollars and can increase for each period of 28 days up to a maximum of 825,000 Australian dollars.
Australian resident entities may be subject to further penalties if they commit an offence by refusing or failing to comply with their obligation to publish the requ.
[00:10:48] Speaker B: Thanks, David. That's quite a lot of information to take in and consider.
If I'm one of our listeners and I think that my global group might be impacted by the new Australian public CBC rules, what are some key actions that I should be kicking off today?
[00:11:04] Speaker A: Yeah, thanks Josh. I think there are a few key immediate considerations for potentially impacted groups.
So a key first step is to carefully consider whether you're in scope of the rules, and for some groups this will be very clear. But for others this might require some deeper consideration of the specific scoping elements, particularly for private groups.
And as part of this process, consideration could also be given to whether exemptions may be available.
So for groups that are in scope, it's really important to start considering the data requirements so ensuring that the data and information required is available from the appropriate data sources, noting as you mentioned earlier, that there can be differences with OECD CBC reporting data and other public CBC reporting measures, and so care will be needed here to make sure that the data being captured aligns with the rules.
And a natural extension would also be to consider other data requirements that may overlap or interact with these measures, such as OECD CBC reporting, EU public CBC reporting and also pillar 2 transitional CBCR safe Harbour data requirements in terms of processes or systems that are being used to capture that data. And as a final takeaway, Josh, given the nature of the information to be reported for public consumption, it'll be important for tax and finance teams to engage with relevant stakeholders across the organisation, which may be quite broad on the information that will be reported and also the narrative on the group's approach to tax and how this interacts with the group's overall approach to tax transparency, reporting and tax governance more broadly.
[00:12:40] Speaker B: Thanks, David. So that brings us to the end of our episode. Thank you for joining us today. Stay with us as we continue this journey in our upcoming podcasts. Please also check out our monthly newsletter, which will bring you the latest key updates around selected editorial pieces from our global tax network.
