Treasury: draft legislation for consultation impacting SGEs

Anthony Hayley

12 April 2023

Earlier this month, Treasury released draft legislation, Treasury Laws Amendment (Measures 4 for Future Bills) Bill 2023: Multinational tax transparency - Tax changes, for consultation. This will impact reporting requirements for significant global entities within Australia.

What is a Significant Global Entity (SGE)?

An entity is considered a significant global entity (SGE) if one of the following requirements is satisfied:

An entity is a global parent entity (GPE) with an annual global income of AUD $1 billion or more for a period.
An entity which is a member of a group of entities that are consolidated for accounting purposes as a single group and one of the other group members is a GPE with an annual global income of AUD $1 billion or more for a period.
An entity which is a member of a notional listed company group and one of the other group members is a GPE with an annual global income of AUD $1 billion for a period.

What are the proposed changes?

The measures were announced in the October 2022‑23 Federal Budget and require SGEs to prepare and publish certain tax information on a country‑by‑country (CBC) basis and a statement on their approach to taxation. This information will then be made available to the public by the Commissioner and is intended to enhance the tax information that entities disclose for income years commencing from 1 July 2023.

These obligations apply to CBC reporting parent entities, which are certain types of constitutional corporations, partnerships or trusts, and which are members of a CBC reporting group. CBC reporting parents are entities which:

are not individuals, and
are members of a CBC reporting group and not controlled by any other member of the group, and
have annual global income in excess of AUD $1 billion.

Annual global income (in simplistic terms) is based on the consolidated income shown in the latest global financial statements (note, subject to certain adjustments).

Further to the above, CBC reporting parent entities will only be required to report with respect to these new proposed changes in relation to an income year if the following requirements are met:

they are a CBC reporting parent for the income year, and
they are a member of a CBC reporting group at any time during the income year, and
at any point during the income year, they (or a member of their CBC reporting group) is either an Australian tax resident or a foreign resident with an Australian permanent establishment.

CBC reporting parent entities are required to publish the following tax information on an Australian government website, in the approved form, which the Commissioner can then make available to the public:

the names of each entity in the CBC reporting group and a description of the group’s approach to tax; and
for each jurisdiction the CBC reporting group operates in, the CBC reporting parent entity must publish, at a group level:
- a description of main business activities
- number of employees
- revenue from unrelated parties
- revenue from related parties
- expenses from related party transactions
- profit and loss before income tax
- a list (including the value of) intangible assets
- a list (including the value of) tangible assets
- income tax paid (on cash basis)
- income tax accrued (current year)
- effective tax rate
- the reasons for the difference between income tax accrued (current year) and the amount of income tax due if the income tax rate applicable to the jurisdiction were applied to profit and loss before income tax
- the currency used in calculating and presenting the above information.

Substantial penalties may apply in circumstances of non-compliance. The selected tax information must be published within 12 months after the end of the income year to which it relates which can be varied by the Commissioner by written notice. This is mainly to provide SGEs the flexibility where they are subject to different reporting timelines in other jurisdictions to those in Australia.

Talk to your trusted advisor

If your organisation is an SGE, we recommend speaking with your Moore Australia advisor. We can provide guidance on what this legislation means for you.