John Salvaris and Melissa Spencer explore some uncertainties regarding the proposed GPFS legislation.
“A long long time ago I can still remember
how that music used to make me smile
And I knew if I had my chance
That I could make those people dance
And maybe they'd be happy for a while”
These were Don Maclean’s opening words to ‘American Pie’.
These words came to us as we were thinking about the Australian Taxation Office (ATO) consultation process surrounding the new general purpose financial statements (GPFS) legislation.
And we were thinking, hmm, maybe not everyone is happy and dancing about some of these new proposals.
If you are an insurance branch of an offshore entity and regulated by Australian Prudential Regulation Authority (APRA), you may need to cast your dancing shoes aside and consider the following:
The proposed requirement to prepare and lodge GPFSs with the ATO should apply, where you:
As an insurance branch of an offshore entity, you are required to prepare financial statements that comply with Australian Accounting Standards. However, these statements are required to be audited and lodged with APRA and are prepared on a different basis than financial statements prepared in accordance with the Corporations Act, which are lodged with ASIC. Therefore the question remains, do the above requirements apply?
A foreign insurance company (and holder of an AFS license) will generally be required to lodge audited financial statements with ASIC. The current drafting of the rules confirms either a stand-alone GPFS just for the entity, or a consolidated GPFS that includes the entity is acceptable. Therefore, prima facie, this requirement should not apply.
However, the consultation paper examines two alternative interpretations of the above:
The answer is unclear at this stage and is expected to the resolved via the ATO consultation process (submissions were due 30 September 2016). KPMG is preparing a submission.