Australia in late 2015 introduced new country-by-country (CbyC) reporting requirements that require entities to file some combination of a CbyC report, Master File and Local File with the Australian Taxation Office (ATO). However, some entities (particularly Australian subsidiaries of overseas headquartered multinationals) may be unwilling or unable to gather and lodge the required information.
Australia’s tax laws contain a range of penalties for entities that do not comply with their reporting obligations, including penalties for false or misleading statements about tax-related matters, failing to file statements on tax-related matters in the correct format, or on time. However, it has been reported that the administrative penalties are unlikely to be sufficiently large to deter non-compliance. As a result, the Shadow Assistant Treasurer has introduced a private members bill into the House of Representatives that proposes to introduce a penalty regime that would increase the maximum penalty for failure to file a CbyC report to A$270,000 (from a current maximum of A$5,400), with the potential for tax office investigation.
The cash impact of non-compliance if the proposed legislation is passed would be significant. Moreover, that cost is likely to be further compounded by the more aggressive approach adopted by the ATO in relation to non-compliant taxpayers. The ATO has indicated during its consultation process that non-compliant taxpayers will be viewed adversely in risk assessment and audit scenarios.
Taxpayers need to be aware of the CbyC reporting requirements, and Australian subsidiaries in particular need to make their overseas parent entities aware of their obligations, as the true cost of non-compliance is likely to be unacceptably high.
Read a March 2016 report prepared by the KPMG member firm in Australia: Country by Country Reporting – is non-compliance a strategy?
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