Australia: Public country-by-country (CbC) reporting proposed in 2022-2023 federal budget

Australia’s 2022-2023 federal budget—released on 25 October 2022—includes proposals for new public reporting of certain tax information by multinational enterprises (MNEs) beginning 1 July 2023:

• MNEs that are significant global entities (SGEs) would be required to publicly release certain tax information on a country-by-country (CbC) basis and a statement on their approach to taxation. Assuming an SGE is similar to the current definition, generally speaking, an SGE is a global parent entity with an annual global income of $1 billion* or more, and any member of such a global parent entity’s group.
• Australian public companies (listed and unlisted) would be required to disclose information on the number of their subsidiaries and their country of tax domicile.
• Tenderers for Australian government contracts worth more than $200,000 would be required to disclose their country of tax domicile (by supplying their ultimate head entity’s country of tax residence).

Notably missing is the proposal to require the disclosure of material tax risks to shareholders under the Treasury consultation paper [PDF 515 KB] released 5 August 2022. Read TaxNewsFlash

The proposal included consideration of whether this should apply to companies that have tax haven exposure, or alternatively whether companies should be required to make a disclosure where they have self-assessed a high-risk rating under the Australian Tax Office’s (ATO’s) practical compliance guidelines.

Some companies have already been voluntarily making comprehensive tax disclosures since 2021 under the Global Reporting Initiative (GRI) 207 reporting standard that includes, on a CbC basis, disclosures of profits and taxes. There are many common data points across the GRI 207 CbC approach and both the OECD’s CbC reporting recommendations and the EU’s public CbC reporting directive. However, a growing concern is the lack of global consistency in the approach to CbC reporting. 

The design of the CbC transparency measures in Australia will be important for achieving a reasonable balance between the public benefit obtained from the measure and any additional administrative and compliance burden that falls on the disclosing taxpayers. If an MNE is already preparing CbC reporting data under the GRI 207 or OECD CbC reporting recommendations, then it would be helpful if this was an acceptable approach to meet the proposed mandatory public CbC rules in Australia to reduce compliance costs.