Australian Local Files - get ready for round 2 | KPMG | GLOBAL

Australian Local Files - get ready for round 2

Australian Local Files - get ready for round 2

Jane Rolfe, Aaron Yeo and Anirudh Theertham discuss new requirements in the ATO's final draft of Australian Local File for 2018 tax years.

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The Australian Taxation Office (ATO) has recently released its final draft of the 2018 Message Structure Table (MST) and associated XML Schema for the Australian Local File (ALF) for 2018 tax years.

This will represent the second ALF that most taxpayers will be required to lodge and there are a number of new requirements and key changes from the first ALF such that a simple roll-forward is not an option. In particular, key changes to the ALF requirements include:

  • Expansion of the Short Form Local File: The information required for the Short Form Local File has been expanded. For example, rather than explaining the business and strategy of the taxpayer in a holistic manner, taxpayers must now identify all of their main business lines and functions, the strategies deployed in each business line or function and the extent each business line or function overlaps or complements each other. This goes beyond the detail currently required in an Organisation for Economic Co-operation and Development (OECD) Local File in respect of business information.
  • Third party expenses reimbursements: Taxpayers must now categorise reimbursements of third party costs based on the nature of the underlying transaction. For example a recharge of a third party insurance expense must now be categorised as an “insurance” transaction.
  • Foreign exchange (FX) gains and losses: The good news is that the disclosure requirements have been reduced for certain types of transactions, provided that certain criteria are met. The bad news is that additional analysis needs to be undertaken to determine whether the reduced disclosure applies, and where it doesn’t, more granular detail is required. Based on our experiences of the challenges this posed in year one, this exercise should be undertaken well in advance of lodgement time.

Taxpayers continue to be able to utilise the administrative solution, which allows Part A of the ALF to be submitted with the tax return in lieu of Questions 2-17 of the International Dealings Schedule. We expect more taxpayers to utilise the solution in their second year, and this may be more attractive given the ATO has extended the due date for Part A of the ALF to 14 September 2018 for 31 December/31 January year-end balancers.

The effort required to complete the ALF in year 2 has increased and even the reduced FX disclosures require additional analysis to determine eligibility. Taxpayers should therefore allow themselves ample time to collate the additional information required for the ALF, particularly if they are seeking to rely on the administrative solution.

© 2018 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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