On Friday 20 July 2018, Treasury released draft legislation to extend the definition of a significant global entity (SGE) by including members of large multinational groups headed by proprietary companies, trusts, partnerships and investment entities. For the moment, this draft is styled the: Treasury Laws Amendment (Measures for a later sitting) Bill 2018. This measure was previously announced in the 2018-19 Budget.

Significant Global Entity

The draft proposes to amend the definition of SGE, in s960-555 of the ITAA 1997, so that it applies to ‘notional groups’ as well, that is it:

  • applies to groups of entities headed by an entity other than a listed company in the same way as it applies to groups headed by a listed company;
  • is not affected by the exceptions to requirements applying to consolidated or materiality rules in the applicable accounting rules.

Broadly, an SGE is an entity that has annual global income of AUD$1 billion or more, or one that is a member of a group of entities that are consolidated for accounting purposes as a single group and the global parent entity of the group has annual global income of AUD$1 billion or more.

Currently, if an entity is a ‘significant global entity’, it is subject to Australia’s country by country reporting rules, the multinational anti-avoidance law and the diverted profit tax. Significant global entities also face increased administrative penalties under the taxation law and may face additional reporting requirements.

CbC Reporting

The Draft also proposes to

  • modify the rules for entities, that must undertake country-by-country reporting (CbC Reporting), under Subdivision 815-E, so that the definition of CbC Reporting Entity does not have to be the same thing as the modified definition of SGE.

The draft Bill amends the country by country reporting regime in Subdivision 815-E. Previously, one of the conditions for an entity to need to report under that regime was that the entity was a significant global entity. But, as a result of these proposed changes, to the definition of significant global entity, the scope of the CbC Reporting entities would differ from the scope of the entities required to undertake country by country reporting under Action 13 of the BEPS Action Plan.

To better align with international standards, the amendments change the scope of Subdivision 815-E so that it requires reporting by country by country reporting entities rather than all significant global entities. An entity is a country by country reporting entity if it would be a significant global entity if:

  • the entity was a global parent entity (whether or not it is controlled by another entity); and
  • exceptions to consolidation (but not rules about materiality) were taken into account in working out the membership of notional listed company groups.

Effectively, most significant global entities will still be country by country reporting entities. But there are some differences. For instance, the assumption that the rules around notional groups, take into account exceptions from consolidation, means that an entity that is only a significant global entity, because these exceptions are disregarded, will not be a country by country reporting entity.

Proposed date of effect: 1 July 2018.

Submissions close on 17 August 2018.

FJM 7.8.18

[Treasury website: Consultation Page, Draft Bill, Draft EM; Related TT Article: Budget Announcement; LTN 138, 20/7/18; Tax Month – July 2018]


Comprehension questions (answers available)

  1. Was this measure previously announced in the 2018 Federal Budget?
  2. Is the definition of SGE broadened to groups headed by unlisted companies, partnerships and trusts?
  3. Is the definition of ‘CbC Reporting Entities’ still based on this (now revised) definition of SGC?
  4. Is the released material a Bill?

[answers: 1.yes;2.yes;3.no(there’s now a definition of ‘CbCreportingEntity’whichIsSimilarButNotTheSame);4.no(draftBillForConsultation)]

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