Significant Global Entity definition broadened – to include groups headed by partnerships, trusts and private equity investors ($1b turnover threshold unchanged)

In the 8 May 2018 Federal Budget, the Government announced it would broaden the definition of ‘Significant Global Entity’ (SGE).

The $1b turnover threshold will remain the same, but it will no longer be just a group headed by a public company or a private company required to provide consolidated financial statements. Subject to being legislated, the definition will be broadened to include members of large multinational groups headed by private companies, trusts and partnerships. It will also include members of groups headed by investment entities.

The definition was restrictive and did not bring as many large multinationals, within scope, especially large multinational groups acquired by private equity.

This measure is designed to ensure that various integrity and anti-avoidance rules operate, as the Government wants. These measures include the following.

1. the Multinational Anti-Avoidance Law (MAAL);
2. Diverted Profits Tax (DPT);
3. Country by Country Reporting (CbCR);
4. the requirement to prepare General Purpose Financial Statements (GPFS); and
5. SGEs are also subject to increased administrative penalties.

The concept of an SGE was introduced as part of the Tax Laws Amendment (Combating Multinational Tax Avoidance) Act 2015 in the 2015 Budget.

This broader definition is due to commence on 1 July 2018.

4.6.18 – FJM

[Treasury website: Budget Paper #2, Part 1, Revenue Measures (page 26); KPMG, 4/6/18; Tax Month – June 2018]

Study questions (answers available)

1. Is the definition going to be widened by expanding the types of entities that are at the top of the group – such as partnerships, trusts and investment entities?
2. Will the definition be broadened by removing the requirement to produce consolidated financial statements (for those, not ‘public’ and thus not already required to)?
3. Will the $1b turnover threshold be changed?
4. Was this announced after the Budget?
5. Will the start date be 1 July 2019?
6. Does the scope of a SGE impact all of the MAAL, DPT, CbC reporting and the requirement to produce General Purpose Financial Statements?