This is a new requirement in the Australian compliance landscape. It is in addition to all existing requirements.
Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 – changes effective from 1 July 2016 to require lodgement of the General Purpose Financial Statements (GPFS) with the Australian Taxation Office (ATO) with their annual tax assessments, which is then forwarded to Australian Securities & Investment Commission (ASIC).
A Significant Global Entity (SGE) is:
A global parent entity with an annual global income of A$1 billion or more; or
A member of a group of entities consolidated for accounting purposes where one of the other group members is a global parent entity with an annual global income of A$1 billion or more
A Significant Global Entity is subject to new rules where that entity is:
A corporate tax entity (either an Australian resident or foreign resident entity operating an Australian permanent establishment);
Is not required to lodge GPFS with ASIC; and
Is required to lodge an income tax return for the income year.
The following classes of entities will need to lodge GPFS with the income tax return:
Small companies that have class order relief and do not need to lodge financial reports with ASIC
Companies that are grandfathered under the Corporations Act so that they do not need to lodge financial reports with ASIC
Entities that are taxed as companies but are not companies under the Corporations Act such as limited partnerships and public trading trusts
Companies that lodge special purpose financial reports with ASIC
ATO Consultation Paper re: a number of unclear issues:
ATO will accept stand-alone GPFS, but also consolidated GPFS which includes the taxpayer.
SGEs to lodge their Australian resident entity’s consolidated GPFS or the consolidated GPFS of the group they belong to. Entities with foreign parents preparing GPFS in accordance with standards other than Australian Accounting Standards would not be able to lodge such consolidated GPFS.
Australian accounting standards generally apply to entities with an obligation to prepare reports under Part 2M.3 of the Corporations Act 2001. If the entity wants to rely on the parent’s consolidated report, the report would need to be prepared in accordance with the Australian accounting standards.
The entity can choose whether to provide GPFS that relate to the entity or the group of which the entity is a member. (i.e. the entity can submit the global group’s report prepared in accordance with the accounting standards of the parent’s country).
The legislation does not address a requirement to have the GPFS audited but the paper strongly recommends it.
Whether the Reduced Disclosure Requirements (RDR) will be sufficient in complying with the new law is unclear. Under the RDR, the entity is permitted to not disclose some information such as related party transactions under AASB 124 and certain tax information under AASB 112.