As taxpayers are beginning to turn their minds to the practicalities of completing the Australian Local File (ALF) as part of Country-by-country (CbC) reporting for Significant Global Entities (SGEs), the Australian Taxation Office (ATO) is continuing to publish guidance to assist taxpayers on their CbC journey.
Most recently the ATO has published the Local File / Master File Detailed Design on the ATO website. Key observations on this include:
- The detailed design sets out requirements for preparing and lodging the Master File and ALF using the XML schema format. In order to be able to file, this will require the XML Schema to be developed in house, licenced or the lodgement outsourced.
- The detailed design makes it clear that the ALF has a number of objectives covering confirmation on what is being filed, administrative information on the Master File and CbC report (including the notification requirements where an overseas entity is lodging the CbC reporting), as well as all the transactional and business information to be provided in the ALF short form, part A and part B sections.
- The design of the XML schema allows for separate submissions of the three components of the ALF (short form, Part A and Part B) and the Master File – to deal with the different lodgement timing options if using the administrative concession to obviate the need for Section A of the International Dealings Schedule (IDS).
- There are significant changes to the naming conventions of transaction types, category codes and transfer pricing methods compared to the IDS.
Other feedback from the ATO is that:
- the portal is unlikely to be open for ALF submissions until 1 July, with tax return stationary changes likely in June. This will make it difficult for SGEs wanting to lodge early (for example they are in a tax refund position or because the statutory due date is sooner – such as Trusts). Once open the portal will be able to accept all or parts of the XML schema
- the ATO is developing instructions for completion of Part A that are expected to be released in late May.
Given the unique aspects of Australia’s implementation of the Local File, the ATO is one of the most advanced tax authorities in terms of providing CbC reporting guidance – albeit undoubtedly there will continue to be questions along the way as taxpayers seek to ensure that they are not inadvertently caught by the substantially increased administrative penalties.