Contributed by Vicca Chartered Accountants, Australia

Australia’s ‘Significant Global Entity’ (SGE) regime has been effective operating since 2016, submitting entities operating in Australia with over $1 billion (AUD) in global revenue to increased reporting requirements and penalties. The regime however had a notable flaw in its criteria – Where the parent of a group of entities was headed by a non-corporate entity, it was possible for the group to not technically meet the criteria.

Recently, the legislation has been amended to resolve this inconsistency by creating a “Notional Listed Company Group” concept, effectively treating any parent entity as though it were a listed corporation for the purposes of defining an SGE. This amendment is effective for financial years beginning on or after 1 July 2019, and so entities previously exempted from the regime may need to review their obligations.

The requirements imposed on an SGE also received a minor update with the amendment. Broadly, these requirements are outlined as below:

1. Financial Reporting
·         Corporate members of the Notional Listed Company Group are required to prepare and lodge General Purpose Financial Statements (or be included in another entities GPFS) to the Australian Taxation Office (ATO).
·         The ATO must by law provide a copy to Australian Securities and Investment Commission (ASIC), who must by law make this available to any person who requests a copy or extract.

2. Penalty Increases
·         Penalties applicable to the following schemes are doubled:
·         Tax Avoidance and Profit Shifting Schemes
·         Making a False or Misleading Statement
·         Penalty for failing to lodge a document on time is multiplied by 500 (This is $105,000 each 28 days late, up to $525,000). Note this includes the above-required financial statements, and also Income Tax Returns, Business Activity Statements, and any other document required under tax law.

3. Country-by-Country Reporting
·         This category was previously a part of SGE, but has been separated into a new, separate definition. The definition differs only by reflecting that Accounting standards surrounding Materiality apply to Country-by-Country reporting, while they do not apply to determining the Notional Listed Company Group.
·         In contrast to the requirements under the SGE regime, exemptions are available for this category where international activity is limited.
·         If no exemption is granted, a series of reports must be lodged in relation to global operations/activities, transfer pricing, statements on operations/activities/dealings and allocation of income.

For further information regarding SGE compliance in Australia please email [email protected]

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