Multinational tax avoidance laws to commence soon with increased disclosure obligations

Earlier this month the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 (Bill) was passed with the support of the Greens. The Bill, now awaiting Royal Assent, passed with key amendments (Amendments) to the original bill reported on in our previous update.

The Bill aims to ensure that large multinational companies ‘pay the right amount of tax’ through anti-avoidance provisions, increased disclosure requirements, and increased penalties.

The financial statement disclosure obligations of significant global entities – corporate entities part of a group with a global income of more than AUD$1 billion – are now due to commence from 1 July 2016.

Below is a brief summary of the Amendments.

General purpose financial statement

Under the Amendments, multinational corporations with a global income of AUD$1 billion or more, will now have to lodge with the Commissioner of Taxation (Commissioner) a general purpose financial statement by their tax return lodgement date. The Commissioner is subsequently required to provide the Australian Securities and Investments Commission (ASIC) with this statement. The disclosure to ASIC is significant as documents filed with ASIC are publicly available. This dramatically increases the transparency of large multinational corporations’ Australian operations.

The general purpose financial statement must be prepared according to accounting principles, or if accounting principles do not apply, commercially accepted principles relating to accounting. Interestingly, if the corporation is a member of a group that is consolidated for accounting purposes, a choice is provided to give a financial statement in relation to the individual corporation on a stand-alone basis, or the individual corporation and some or all of the other members of the group.

The general purpose financial statement obligation is in addition to the country-by-country reporting statements a significant global entity is required to submit to the Commissioner that describe its:

• operations, activities, dealings and transactions; and
• income and tax allocations between countries and the other members of its group if applicable.

Private company disclosure threshold

The Commissioner must now publicly disclose the total income, net income, taxable income, and income tax payable for Australian resident private companies with a total income of $200 million or above. This has expanded disclosure requirements for Australian resident private companies. However, the threshold has been increased from the initially debated $100 million. According to the Greens, this measure will affect 281 private companies in Australia.

Oddly, there are no grouping rules requiring related Australian private companies to group their income when measuring the $200 million threshold.

This amendment compliments the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Act 2015 (Cth) passed in October that obliges the Commissioner to publish taxation information concerning public companies and Australian subsidiaries of foreign groups with an Australian revenue of more than AUD $100 million.