The onerous Australian country-by-country reporting obligations

 By Tony Nunes, Kelly + Partners Chartered Accountants

Although the ATO’s approach to country-by-country (CbC) reporting is mostly consistent with OECD’s BEPS Action 13, there are several differences that are easy to overlook. For significant global entities (SGEs) operating in Australia, these are important to note, especially as significant penalties may apply.

Under Australian law, SGEs are required to lodge three statements with the ATO within 12 months of the end of the income year: a local file, master file, and a CbC report.

Of note, the Australian local file deviates significantly from the OECD’s local file as set out in the OECD Transfer Pricing Guidelines and what is seen in other countries. Instead, the Australian local file is a three-part file in the ATO’s prescribed form that includes detailed transaction disclosures for all international related party dealings (including counterparties, amounts, transfer pricing method, agreements etc.), and information on the business.

Although preparation of transfer pricing documentation in Australia is not compulsory, it must be prepared in line with the requirements set out in the legislation to be eligible for penalty protection where there is a transfer pricing adjustment by the ATO. It is noted that an OECD-style local file will not suffice, as Australian-specific legislation outlines additional requirements that assess the arm’s length nature of the dealings and whether a transfer benefit has been received.

For SGEs, the penalty for late lodgments ranges from AUD 111,000 to a maximum of AUD 555,000, and applies for each separate CbC statement. These are harsh penalties to ensure that SGEs meet their Australian compliance requirements.

Tony Nunes

GGI member firm
Kelly + Partners Chartered Accountants
Advisory, Auditing & Accounting, Corporate Finance, Tax, Fiduciary & Estate Planning
Sydney, Australia
T: +61 2 9933 8866
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Kelly + Partners Chartered Accountants is a specialist chartered accounting business that assists private businesses, private clients, and families to manage their business and personal financial affairs. The Kelly + Partners Tax Consulting practice is respected as one of the foremost tax advisory firms in Australia and offers the full range of direct, indirect, and international tax services.

Tony Nunes has over 22 years’ experience in providing tax advice. He has extensive experience in advising clients on issues affecting cross-border transactions, acquisitions, and restructures, and in all aspects of structuring the ownership and financing of corporations and their operations.

 International Taxation Newsletter, No. 17, Autumn 2022 l Photo: Maurizio De Mattei - stock.adobe.com