Background

On 28 November 2024, Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 passed all stages of parliament without amendment. The bill subsequently received royal assent on 10 December 2024. Contained within schedule 4 of that bill are the new public country-by-country (‘CBCR’) reporting measures. The rules have been inserted into the Taxation Administration Act 1953 (Cth) (‘TAA’).

The new CBCR rules form part of the Albanese government’s multinational tax integrity election commitment package, aimed at ensuring a more transparent and fairer tax system. The rules attempt to achieve a more transparent tax system by requiring that certain multinational entities publicly disclose their approach to tax as well as important commercial matters about their operations in other jurisdictions. The matters required to be reported are extensive.

The explanatory materials for the bill introducing the regime explicitly state that the purpose of the CBCR rules is to improve information flows to help the public, including investors, to compare entity tax disclosures, in order to better assess whether an entity’s economic presence in a jurisdiction aligns with the amount of tax they pay in that jurisdiction.

What kinds of entities will be required to report?

Under section 3D of the Tax Administration Act 1953 (Cth), the CBC reporting obligation will apply to an entity where all of the following conditions are satisfied:

1. The entity is either:
   • A constitutional corporation; or
   • A partnership in which each of the partners is a constitutional corporation; or
   • A trust of which each of the trustees is a constitutional corporation;
2. The entity was a country-by-country parent (as defined by s 815-375 of the ITAA97) for a period that includes the whole or part of the preceding reporting period;
3. The entity is a member of a country-by-country reporting group (as defined by s 815-380 of ITAA97) at any time during the reporting period;
4. At any point during the reporting period, they, or a member of their country-by-country reporting group, is an Australian resident or foreign resident with an Australian permanent establishment;
5. $10 million or more of their aggregated turnover (as defined by s 328-115 of ITAA97) for the income year is Australian-sourced;
6. They are not an exempt entity or included in a class of exempt entities.

When must the report be made by and what is the reporting period?

As per s 3D(2)(a) of the TAA, an entity’s reporting period will be the period for which audited consolidated financial statements for the entity are prepared. Furthermore, under s 3D(3) of the TAA, the relevant reporting by the entity is due 12 months after the financial period ends. The rules themselves apply for financial reporting periods starting on or after 1 July 2024. Therefore, the first report for relevant entities will be due by 30 June 2026.

Are there any exemptions or exclusions?

Under subsection 3DB(4), the Commissioner may, by legislative instrument, specify a class of entity that will be exempt from the reporting requirement in section 3DB(3). As per s 3DB(5) and (6), the Commissioner may also make an exemption, by notice in writing, for a specific entity for a specific reporting period, or the Commissioner may exempt an entity from reporting information of a particular kind for a specific reporting period. These last two mentioned exemptions are administrative decisions.

What needs to be reported?

As can be seen below, the information required to be reported by relevant entities is expansive. Under section 3DA(1) of the TAA, the following information must be reported by the relevant reporting entity.

General matters

The following general matters must be reported by all relevant reporting entities:

• The name of the entity;
• The names of each other entity that, at that time was a member of the country-by-country reporting group;
• A description of the country-by-country reporting group’s approach to tax;

Information on a country-by-country basis

If the country-by-country reporting group operates in a jurisdiction specified in a determination made by the Minister, the following matters must also be reported:

• The name of the jurisdiction;
• A description of main business activities;
• The number of employees (on a full-time equivalent basis) as at the end of the reporting period;
• Revenue from unrelated parties;
• Revenue from related parties that are not tax residents of the jurisdiction;
• Profit or loss before income tax;
• The book value at the end of the reporting period of tangible assets, other than cash and cash equivalents;
• Income tax paid (on a cash basis);
• Income tax accrued (current year);
• The reasons for the difference between the income tax accrued and the amount of tax due if the income tax rate applicable in the jurisdiction were applied to the entity’s profit and loss before income tax;

Information on an aggregated basis

For jurisdictions in which the country-by-country group operates that are not mentioned in the determination made by the Minister, the following must be reported:

a) A description of the country-by-country reporting group’s main business activities for the reporting period in the area consisting of those jurisdictions;

b) The following amounts for the reporting period in respect of each jurisdiction in the area, published as a sum of those amounts:

• The number of employees (on a full-time equivalent basis) as at the end of the reporting period;
• Revenue from unrelated parties;
• Revenue from related parties that are not tax residents of the jurisdiction;
• Profit or loss before income tax;
• The book value at the end of the reporting period of tangible assets, other than cash and cash equivalents;
• Income tax paid (on a cash basis);
• Income tax accrued (current year).

What jurisdictions are relevant to the country-by-country reporting?

A formal Minister’s determination has yet to be made listing the specific jurisdictions where the information contained in paragraph (d) in the above section must be reported. However, the draft determination, published in early 2024, lists the following jurisdictions as being relevant to all reporting periods starting on or after 1 July 2024:

What penalties are there for late or deficient reporting?

The reporting requirements for relevant entities are made especially burdensome in light of the penalties for non-compliance. Under s 288-140(1) of the TAA, an entity that fails to publish the relevant information to the Commissioner in the approved form within 12 months after the end of the relevant reporting period is liable to an administrative penalty.

Furthermore, an entity that becomes aware of a material error contained in any of the relevant published information and fails to correct that error, will be liable to an administrative penalty. The information must be corrected within 28 days of the entity becoming aware of the error.

The entity will be penalised 500 penalty units for failing to make either of these abovementioned deadlines and will be penalised a further 500 penalty units for each 28-day period (or part thereof) that the information hasn’t been published to the Commissioner or the information remains uncorrected.

The penalty units will, however, max out at 2,500 units. 500 penalty units currently amounts to $165,000 and 2,500 units amounts to $825,000.

Concluding remarks

These reporting rules are now law as of 10 December 2024 with the first reporting period being from 1 July 2024 to 30 June 2025. Any large multinational companies deriving Australian sourced income must be alert to whether they are required to report under this new regime and how much information they will potentially need to report. For expert guidance on these matters, contact HallChadwick’s tax specialists.