Disclosure of subsidiary information by public companies
The Department of Treasury has recently released the exposure draft of the Treasury Laws Amendment (Measures for Future Bills) Bill 2023: Financial reporting by public companies (Bill). If passed, the Bill would require both listed and unlisted Australian public companies to disclose information on their subsidiaries, including their country of tax domicile.
The new measure, announced as part of the October 2022-23 budget, aims to strengthen public scrutiny over disclosures made by public companies, and further align Australia with international approaches to enhanced corporate tax transparency (such as that of the UK). It is hoped that having this information in the public domain will help build further trust in the integrity of Australia’s tax system by facilitating an informed discussion on tax compliance.
The Department of Treasury is seeking stakeholders’ view (up until 13 April 2023) on the Bill.
Proposed amendments to the Corporations Act
Under the Bill, a public company’s annual financial statement report will be required to include either:
- where the public company is required by accounting standards to prepare financial statements in relation to a consolidated entity – a ‘consolidated entity statement’ which discloses the details of each entity within the company’s consolidated group, encompassing:
- its name and whether it is a body corporate, partnership or trust;
- details of whether the entity is a trustee of a trust, partner in a partnership or participated in a joint venture within the consolidated entity;
- place of incorporation (if a body corporate);
- the ownership percentage (if applicable) of the public company; and
- the tax residency; or
- where the public company is not required by accounting standards to prepare financial statements in relation to a consolidated entity, a statement to that effect.
If passed, the Bill would amend section 295 of the Corporations Act to require that annual financial reports for a public company include a consolidated entity statement. Directors (and for listed companies, the CFO and CEO) would then also sign off on the truth and correctness of the consolidated entity statement as part of the director’s declaration.
The amendments would apply to financial reports for the financial year commencing on, or after, 1 July 2023.
If you are interested in making a submission or finding out more about the proposed changes, please contact our people below.
This article was written with the assistance of Cassidy Sponseller, Law Graduate.
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