On 15 August 2016, the Commissioner uploaded the following statement about the consultation he is carrying out on gathering ‘general purpose financial statements’ from ‘significant global entities’ under the 11 December 2015 insertion of s3CA of the Taxation Administration Act 1953.
[ATO website – s3CA of the TAA consultation] [LTN 156, 15/8/16]
Provision of general purpose financial statements
On 11 December 2015, Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 was enacted. It amended the Taxation Administration Act 1953 to require corporate tax entities that are significant global entities to give the Commissioner a general purpose financial statement if they do not lodge one with the Australian Securities and Investments Commission (ASIC).
Overview of the Law
- You will be affected by this measure for an income year if you satisfy all of the following:
- you are a corporate tax entity (either an Australian resident entity or foreign resident entity operating an Australian permanent establishment) that is a significant global entity (annual global income of $1 billion or more – s960-555 ITAA97);
- you don’t lodge a general purpose financial statement with ASIC;
- you are required to lodge an income tax return for the year.
- You can be affected even if you are not a reporting entity for accounting purposes.
- Your general purpose financial statement must be for the financial year that most closely corresponds to the income year. You must give it to us by the time you’re required to lodge your income tax return.
- The law imposing this measure is set out in section 3CA of the Taxation Administration Act 1953. It was enacted on 11 December 2015 by the Tax Laws Amendment (Combating Multinational Tax Avoidance) Act 2015. It applies to income years commencing on or after 1 July 2016. For most affected entities, this means you will not have to give us a general purpose financial statement until early 2018.
The following are the consultation questions, without the discussion that follows each batch of questions (refer to the above link for the full text).
Entities affected by this measure
Consultation question (1) – Do you think there is scope to minimise duplication of reporting by consolidated group members (see paragraph 11 below)?
General purpose financial statement for this measure
Consultation question (2) – Under this measure (specifically subparagraphs 3CA(5) (a) (i) and (ii) of the Taxation Administration Act 1953), when must an entity prepare general purpose financial statements in accordance with Australian accounting standards or, instead, when may it be able to prepare general purpose financial statements in accordance with commercially accepted principles relating to accounting?
Consultation question (3) – In particular, what is your answer to consultation question (2) for an entity that:
- is required to prepare financial reports under Part 2M.3 of the Corporations Act 2001for lodgment with ASIC or for sending to its members
- is not required to prepare such reports under Part 2M.3 of the Corporations Act 2001
- is relieved by an ASIC Class order from preparing such reports under Part 2M.3 of the Corporations Act 2001
- chooses to give us a general purpose financial statement that relates to the entity and some, or all, of the members of the consolidated group of which it is a member for accounting purposes?
Consultation question (4) – If, under this measure, you are required to lodge a general purpose financial statement prepared in accordance with Australian accounting standards, but you prepare your financial reports in accordance with other accounting principles, what additional disclosures or changes (if any) may be needed so you can give us a qualifying general purpose financial statement based on your existing financial reports?
Consultation question (5) – Do you agree the entities most likely to be affected by the different views outlined in paragraph 17 are those that we have identified in paragraph 18?
Consultation question (6) – For the purposes of this measure:
- What do you consider to be ‘commercially accepted principles relating to accounting’? Must such principles be commercially accepted in Australia?
- How can you show us that:
i. the accounting principles you have applied in preparing your financial statement or consolidated financial statement are commercially accepted principles relating to accounting
ii. the standalone financial statement or consolidated financial statement you give to the ATO is a ‘general purpose financial statement’?
Commencement of this measure
- This measure applies to income years commencing on or after 1 July 2016. Generally this means you will need to give a general purpose financial statement to us for your:
- 2017 and subsequent income years, if your income year ends on 30 June, or later (ie if you are a ‘late’ balancer)
- 2018 and subsequent income years, if your income year ends before 30 June (ie if you are an ‘early’ balancer).
Due date for providing your general purpose financial statement
- You are required to give a general purpose financial statement to us by the day on which you are required to lodge your income tax return.
- The enabling law does not give us the discretion to give you further time to give us a general purpose financial statement. However, if we give you further time to lodge your income tax return, your general purpose financial statement can also be provided by the extended return lodgment due date.
Providing your general purpose financial statement
Consultation question (7) – Should you be permitted to give us your general purpose financial statement by means other than those outlined below? If yes, please provide details of those methods, and why you are unable to use the two proposed channels.
Consultation question (8) – Do you use file formats for general purpose financial statements other than that suggested below? If yes, please provide details of those file formats so we can consider catering for them as part of our systems development for this measure.
Consultation question (9) – Is there a need to allow you to give us your general purpose financial statement in paper form? If yes, please outline why this is the case.
What we do with your general purpose financial statement
Consultation question (10) – Can the process for giving us a general purpose financial statement be streamlined, for example by facilitating the provision of the general purpose financial statement by you directly to ASIC?
- As required by law, we will provide ASIC with a copy of the general purpose financial statement you give us.
- Consistent with our current usage of general purpose financial statements, we may also use the information contained in general purpose financial statements as part of our general compliance activities such as risk assessments.
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