The Australian government has released Exposure Draft legislation to give effect to new corporate tax transparency measures for public companies, both listed and unlisted. These measures are intended to increase public scrutiny over disclosures made by public companies, and will require them to disclose information on the number of subsidiaries and their country of tax domicile. This was previously announced by the government in the October 2022-23 Budget.
New Disclosure Obligations for Australian Public Companies
The proposed measures will come into effect for financial years commencing on or after 1 July 2023.
Specifically, public companies must provide a “consolidated entity statement,” which includes information about entities within the consolidated entity at the end of the financial year.
If accounting standards require a public company to prepare financial statements in relation to a consolidated entity, the consolidated entity statement must provide the following information for each entity
- The name of the entity
- The entity’s type (body corporate, partnership, or trust)
- Whether the entity is a trustee of a trust within the consolidated entity, a partner in a partnership within the consolidated entity, or a participant in a joint venture within the consolidated entity
- The location where the entity is incorporated or formed (for body corporates only)
- The public company’s percentage ownership of each entity that is a body corporate at the end of the financial year
- The tax residency of each entity during the financial year
If accounting standards do not require a public company to prepare financial statements in relation to a consolidated entity, the company must provide a statement to that effect, which will serve as the consolidated entity statement, this is according to the new corporate tax transparency.
Directors, CEOs, and CFOs must also declare that the consolidated entity statement is true and correct at the end of the financial year.
Who the New Tax Transparency Measures Applies To
The corporate tax transparency Measures applies to all Australian public companies, including both listed and unlisted entities. The term “public company” generally refers to a company other than a proprietary company or a collective corporate investment vehicle (CCIV).
Other bodies, such as disclosing entities, large proprietary companies, and registered schemes, are outside the scope of the proposed amendments. Additionally, the proposed law applies only to financial years commencing on or after 1 July 2023.
Key takeaways
- The Australian government has proposed a new corporate tax transparency measure for public companies, which will require them to disclose information about their subsidiaries and their country of tax domicile.
- Under the new law, public companies must provide a “consolidated entity statement” in their annual financial reports, which includes information about entities within the consolidated entity at the end of the financial year.
- The proposed law applies to all Australian public companies, including both listed and unlisted entities, and applies only to financial years commencing on or after 1 July 2023.
- Directors, CEOs, and CFOs must declare that the consolidated entity statement is true and correct at the end of the financial year.
- Interested parties have until 13 April 2023 to comment on the proposed law.
If you need any help with your corporate tax, you can always contact Andersen Australia for inquiries
