Australia: Country-by-country reporting exemption guidance

Australia: CbC reporting exemption guidance

The Australian Taxation Office (ATO) published additional guidance for taxpayers who are (or will be) subject to the country-by-country (CbC) reporting regime. The guidance outlines how taxpayers can apply for a specific exemption from some or all the CbC reporting obligations and also the general principles that the ATO will take into account in making its decision. It applies for taxpayers that are Australian subsidiaries of overseas multinational enterprises (MNEs) as well as Australian-based MNEs. This exemption guidance is part of a larger tranche of guidance that the ATO is releasing to assist taxpayers to comply with the CbC reporting regime.

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Key points

Taxpayers affected by this guidance need to consider the following key points.

  • Content of the exemption request: Taxpayers are to specify, in their request, the CbC reporting obligations that the request is covering (e.g. CbC report, Master file and/or Local file), the reporting periods for which an exemption is sought (up to three years), the entities covered under the exemption, the reasons for seeking the exemption, and any documents supporting the request. 
  • General considerations that the ATO will take into account: Key factors that the ATO will consider in providing an exemption include: (1) whether the taxpayer is subject to a risk review / audit, (2) the scale and nature of the taxpayer’s international related-party dealings, and (3) the tax jurisdiction of the counterparty to the international related-party transactions.
  • Transitional exemption for inbound MNEs: The ATO reiterated that a one-year transitional exemption from the CbC report and Master file (but not the Local file) will be available if the taxpayer’s global parent entity is resident in a jurisdiction that has not implemented CbC reporting rules, but this exemption may extend up to three years if the jurisdiction has officially announced an intention to implement CbC reporting (but does not implement in the three years).  
  • Taxpayers with global parent entities exempted from CbC reporting in home jurisdiction: The ATO will not exempt taxpayers on this basis alone without understanding the reasons for the exemption being granted to the global parent entity by the respective tax authority.
  • Domestic Australian-based MNEs: The ATO is concerned that its obligations to other jurisdictions to automatically exchange CbC reports will not be affected by exemptions granted.  Conversely, Australian-based MNEs with no overseas operations that would be disclosed in the CbC report would have strong grounds for an exemption for the CbC reporting. 
  • Obligation to notify of changes: Exemptions will be granted on the condition that the taxpayer notifies the ATO of subsequent changes to facts or circumstances that could impact on the exemption.  
  • Timing of exemption: The ATO has recommended that an exemption request is made as soon as possible in order for a decision to be made prior to the statutory due date for the reports (being a year after the end of the first reporting period). The ATO aims to respond to requests within 28 days. 

KPMG observation

Affected taxpayers need to consider their facts and circumstances and determine whether an exemption request would be appropriate, particularly given the potential to reduce compliance costs.

 

For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services practice in Australia:

Jane Rolfe | +61 3 9288 6341 | janerolfe@kpmg.com.au 

Aaron Yeo | +61 3 9288 6024 | aaronyeo@kpmg.com.au

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