Australian business tax

Tax agenda 2013

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Are you ready for the new transparency rules?

Australia’s new transparency rules require public reporting by the Australian Taxation Office (ATO) of the tax position of certain taxpayers to the public. Concerns were raised during a very short consultation phase but the Government introduced the Bill with the proposals largely unaltered. The Bill was rushed through parliament and enacted on 29 June 2013 and will affect public companies, private companies and Australian subsidiaries of foreign groups, as well as entities taxed like companies.

Tax Laws Amendment (2013 Measures No. 2) Act 2013 contains changes to overcome privacy provisions and to require new public reporting processes by the ATO. The Explanatory Memorandum lists the main objectives of the amendments, to:

  1. Require ATO reporting of certain tax information for large companies and corporate tax entities with annual net income in excess of $100 million. This is to discourage large corporate tax entities from engaging in aggressive tax avoidance practices, and to provide more information to inform public debate about tax policy, particularly in relation to the corporate tax system.
  2. Enable better public disclosure of aggregate tax revenue collections, even when the identity of particular taxpayers (other than natural persons) could potentially be deduced.
  3. Allow improved sharing of relevant tax information between Government agencies

The ATO will publicly report details of companies and corporate tax entities with annual income of AUD100 million or more, of their gross income, taxable income and tax payable thereon.

The ATO’s public reporting of taxes paid commences from the 2013-14 year of income. As a result, the period to be reported has already commenced. The ATO is expected to issue the first report to the public in late 2015 after the lodgement deadline for all 2013-14 tax returns has passed.

The reporting will apply to private company groups also, which has caused concern to some about disclosure of their gross revenues and taxes paid.

Listed groups, particularly larger groups and those operating internationally, are already receiving increased public attention about their tax structures and taxes paid. Further queries might arise in the 2013 reporting and annual general meetings season.

The public ATO reporting will be very limited in scope. Some Australian groups and companies within multinational groups are considering whether to make proactive disclosures of their total tax and social contribution to protect their reputations. This includes their tax policies, demonstrating compliance with tax reporting and tax payment obligations and other disclosures ahead of these ATO public reporting requirements. Seizing the initiative might be more significant for groups which have apparently low tax payable compared with their turnover.

As well, groups should ensure they are prepared and ready to explain the organisation’s tax profile internally and externally in the event of analysis by media, shareholders or other stakeholders, in order to protect the group’s brand and reputation.

EY works with boards and company management to develop strategies to respond to queries about their tax profiles.