Private clients

Tax agenda 2013

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Private Company Information Made Public

Are you an owner of a large private company? Did you know that the Australian Taxation Office (ATO) now has the obligation to disclose your key financial and tax information to the public?

On 28 June 2013, the Senate passed legislation which will require the ATO to publicly disclose tax information on companies with turnover in excess of $100 million. This measure follows recent global and Australian press about the 'fairness' of tax paid by large companies and a push for more transparency about their respective tax affairs. These new 'transparency measures' are intended to discourage large corporate entities from engaging in aggressive tax minimisation practices.

Following release of the draft legislation, EY put forward its submission that the rules should not apply to private companies, many of which currently have ASIC class order relief from publishing any financial information. These submissions were ultimately unsuccessful and in our view these rules are now unlikely to change (similar ‘transparency rules’ in other countries apply to private companies).

The information to be published by the ATO based on the income tax return lodged will be the company name, ABN, total income (i.e. gross income per financial statements), taxable income and tax payable. Private company owners impacted by these new rules need to consider the likely impact of the publication of this information and subsequent media interest in it.

For example, if turnover is high but taxable profits relatively low some adverse media might be expected as to whether the company is ‘paying its fair share’ of tax. In this case, companies may want to have an explanation prepared which can be released to the media if needed. Similarly, if this is the first time that key customers, suppliers and competitors will have information on the turnover and likely profitability of your business, consideration needs to be given to their potential responses.