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  • Provision of general purpose financial statements by significant global entities

    For each income year starting on or after 1 July 2016, a corporate tax entity that is a significant global entity with an Australian presence must give a general purpose financial statement (GPFS) to the Commissioner of Taxation. This is unless it has already been provided to ASIC.)

    The Commissioner must give a copy of the GPFS to the Australian Securities and Investment Commission (ASIC). This copy will appear on ASIC's register and will be available to the public.

    This requirement is given under section 3CA of the Taxation Administration Act 1953 (TAA 1953). It is intended to provide greater transparency, particularly by large multinationals and certain private groups.

    Note: All legislative references in this document are to the TAA 1953 unless otherwise stated.

    Find out about:

    Who must lodge a GPFS under section 3CA

    You must give the ATO a GPFS if you:

    • are a corporate tax entity (that is, a company, corporate limited partnership or public trading trust) for the income year
    • are a significant global entity (SGE) for the income year
    • are an Australian resident or a foreign resident operating an Australian permanent establishment (PE), at the end of the income year
    • don't lodge a GPFS with ASIC for the financial year most closely corresponding to the income year within the time provided under subsection 319(3) of the Corporations Act 2001 (Corporations Act).

    Section 3CA applies to you regardless of whether you are a reporting entity (or not) under Australian Accounting Standards.

    Any relief or exclusion provided under the Corporations Act or by ASIC in relation to your obligation to prepare or lodge financial reports doesn't affect whether you have an obligation to provide a GPFS under section 3CA. For example, you must lodge a GPFS under section 3CA if you are either:

    • a grandfathered large proprietary company relieved from lodging financial reports under the Corporations Act
    • a head company of a multiple entry consolidated (MEC) group that is otherwise relieved by ASIC from preparing financial reports under Part 2M.3 of the Corporations Act.

    Summary of your obligations to provide a GPFS

    To assist you to understand your obligations to provide a GPFS, we have set out the following most common scenarios in Table 1.

    Table 1: Common scenarios to provide a GPFS

    SGE Corporate Tax Entity

    Obligations under section 3CA

    1. You lodge a GPFS with ASIC within the stipulated time.

    None.

    See If you lodge outside the stipulated time

    2. You:

    • are required to lodge a GPFS with ASIC, but do not
    • lodge special purpose financial statements (SPFS) with ASIC
    • are required to prepare, but not lodge financial reports with ASIC (for example, grandfathered large proprietary companies), or
    • are otherwise relieved from preparing financial reports by ASIC because your parent lodges consolidated financial statements prepared in accordance with Australian Accounting Standards incorporating your financial position and performance with ASIC.)
    • See Members of tax consolidated groups or MEC groups
     

    You must give us a GPFS prepared in accordance with Australian Accounting Standards.

    See How to prepare a GPFS

    See Transitional administrative approach if you are experiencing difficulties in preparing a GPFS in accordance with Australian Accounting Standards.

    3. You are an Australian resident for tax purposes, and you are:

    • not subject to the Corporations Act (for example, corporate limited partnerships)
    • not subject to Part 2M.3 of that Act (for example, certain small proprietary companies), or
    • otherwise relieved from preparing financial reports by ASIC because your foreign parent lodges consolidated financial statements with ASIC, which are prepared in accordance with accounting standards applicable in your parent's home country.
     

    You must give us a GPFS (stand-alone or consolidated) prepared in accordance with Australian Accounting Standards or other commercially accepted accounting principles (CAAP).

    See What is CAAP (where Australian Accounting Standards don't apply

    4. You are a foreign resident operating a PE, and did not lodge a GPFS with ASIC (for example, registered foreign companies).

    In most circumstances you are required to give us a GPFS prepared in accordance with Australian Accounting Standards or CAAP.

    See Foreign residents conducting a business through a permanent establishment

    Best practice

    In complying with section 3CA, you may have options as to how to comply. For example, you may determine that you are able to satisfy the measure by providing a GPFS prepared using Tier 2 Reduced Disclosure Requirements. Alternatively, you may determine that you can satisfy the measure by providing either a GPFS for the Australian sub-group of which you are part, or the GPFS of your ultimate offshore parent.

    In determining which option to adopt, it is suggested that you take into account how each option would best contribute to transparency of your Australian tax affairs.

    In some cases, particularly involving MECs, the GPFS of the head company as prepared under strict accounting rules may give a very limited perspective of your Australian operations. In these cases, you may wish to consider including an effective consolidation/aggregation of the operations of your entire Australian group, even if not strictly required.

    If in your circumstances you choose to apply the interim administrative approach, we suggest that you take steps during this period to be section 3CA ready by considering how you might improve the transparency of your Australian tax affairs for the following years.

    Section 3CA does not require a GPFS to be audited. But we recommend that you keep evidence to demonstrate your GPFS has been prepared in accordance with Australian Accounting Standards (where required) or CAAP (as applicable). We consider best practice is, where possible, to have your GPFS audited, as a way of ensuring you have reliable evidence regarding its preparation.

    How to prepare a GPFS

    If you have an obligation to prepare financial reports under Part 2M.3 of the Corporations Act,Footnote1 your GPFS must be prepared in accordance with accounting standards, as defined in the Corporations Act, and authoritative pronouncements of the Australian Accounting Standards Board (Australian Accounting Standards).Footnote2

    You must give us a GPFS prepared using Tier 1 if you are 'publicly accountable'. If it is appropriate for you to prepare a Tier 2 Reduced Disclosure Requirements GPFS under Australian Accounting Standards (AASB 1053), you can give us these. Alternatively you may choose to use Tier 1.

    If you don't have a Part 2M.3 obligation, your GPFS must be prepared in accordance with CAAP.

    Example 1

    You are a non-reporting entity that prepares and lodges SPFS with ASIC. SPFS are defined, in AASB 1054 Australian Additional Disclosures, to mean financial statements other than GPFSs. As you have not lodged a GPFS with ASIC, you must now prepare and give us a GPFS prepared in accordance with Australian Accounting Standards if you satisfy all other conditions for section 3CA to apply to you.

    Your GPFS must comply with the requirements of all applicable Australian Accounting Standards if you hold them out to be a Tier 1 or Tier 2 GPFS.

    End of example

    As a member of a group of entities consolidated for accounting purposes as a single group, your GPFS must relate to either you alone (referred to in this document as a stand-alone GPFS) or you and some or all of the other members of your accounting consolidated group.

    A group of entities ‘consolidated for accounting purposes as a single group’ refers to individual entities within a group of entities whose financial accounts are consolidated in accordance with the relevant accounting standards in such a way that the assets, liabilities, equity, income, expenses and cash flow of the parent entity and the other members of the group are presented as those of a single economic entity.

    As per AASB 10 (Consolidated Financial Statements), an entity is a member of such a group if it is the parent entity or one of the entities the parent controls that are included in the consolidated financial statements of the group.

    Paragraph 3CA(5)(b) facilitates the preparation and provision of a stand-alone or consolidated GPFS (including a sub-group consolidated GPFS) as the case may be, depending on where you as an affected entity are situated within your group chain.

    Notwithstanding the choice provided by paragraph 3CA(5)(b) to give us either a stand-alone or a sub-group consolidated GPFS, your GPFS must comply with all the requirements of Australian Accounting Standards, or alternatively CAAP if Australian Accounting Standards do not apply in relation to you. If you are a parent and you are not exempt under AASB 10, you can give a stand- alone GPFS if you comply with AASB 127 including any requirement you have to present consolidated financial statements.

    Example 2

    You are an ultimate Australian parent within a larger global group and are not exempt from consolidation under AASB 10. You may prepare your own consolidated GPFS in accordance with Australian Accounting Standards consolidating your subsidiaries including any offshore subsidiaries and branches. That is, a subset of the group of entities your global parent entity consolidates for accounting purposes.

    Alternatively, you can give us a GPFS prepared by your foreign parent that includes your financial position and performance, and is prepared in accordance with Australian Accounting Standards.

    If you are a subsidiary of this ultimate Australian parent, you can give us the consolidated GPFS prepared by the ultimate Australian parent or a GPFS prepared by your ultimate foreign parent that includes your financial position and performance, and is prepared in accordance with Australian Accounting Standards.

    End of example

    Example 3

    You are an Australian parent and you avail yourself of the exemptions provided under AASB 10, you can prepare a stand-alone GPFS in accordance with AASB 127.

    Your stand-alone GPFS should include the necessary disclosures such as the address where your ultimate or intermediate parent's consolidated financial statements are obtainable as required by paragraph 16 of AASB 127.

    End of example

    Effect of relief from preparing financial reports

    Australian Accounting Standards still apply in relation to you in circumstances where ASIC has otherwise relieved you, through an Instrument or Class Order, from preparing financial reports under Part 2M.3 of the Corporations Act. This is for the reason that your parent lodges with ASIC consolidated financial statements prepared in accordance with Australian Accounting Standards incorporating your financial position and performance. In such instances, you must prepare your GPFS in accordance with Australian Accounting Standards.

    Example 4

    Where all the conditions in ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 (Instrument 2016/785) are satisfied, wholly-owned companies are relieved from, among other things, lodging a financial report where the holding entity lodges consolidated financial statements with notes, either:

    • in accordance with Australian Accounting Standards if the holding entity is an Australian company
    • in accordance with accounting standards enforced in the country of the holding entity if the holding entity is a registered foreign company.

    In the first case, Australian Accounting Standards apply in relation to wholly-owned companies relieved by Instrument 2016/785 where the holding company lodges consolidated financial statements prepared in accordance with Australian Accounting Standards. Hence your GPFS must be prepared in accordance with Australian Accounting Standards.

    In the second case, Australian Accounting Standards do not apply in relation to wholly-owned companies that are relieved where your foreign parent lodges with ASIC consolidated financial statements prepared in accordance with accounting standards which apply to your parent in its home country. Hence your GPFS can be prepared in accordance with CAAP.

    End of example

    Information a GPFS must disclose

    Australian Accounting Standards and some CAAP stipulate what information a GPFS discloses and how it is presented. Where a GPFS is prepared in accordance with Australian Accounting Standards, a GPFS is defined in AASB 101 and it needs to comply with the requirements of all standards for Tier 1 or Tier 2.

    A GPFS equivalent should provide a structured representation of the financial position, financial performance and cash flows of the entity. It should provide information about those matters that is useful to a wide range of users in making economic decisions. It should also show the results of the management’s stewardship of the resources entrusted to it.

    To meet this objective, the financial statements should be based on recognition and measurement criteria that faithfully represent the entity's financial performance and position, and provide information about the entity’s:

    • assets
    • liabilities
    • equity
    • income and expenses, including gains and losses
    • contributions by and distributions to owners in their capacity as owners
    • cash flows.

    This information, along with other information in the notes to the financial statements, assists users of those statements. For example, in predicting the entity’s future cash flows including their timing and certainty.

    While section 3CA doesn't require a GPFS to be audited, if you are required to have your GPFS, or GPFS equivalent, audited under another law, you should give us the audited version.

    Financial year most closely corresponding to the income year

    If you are subject to Chapter 2M of the Corporations Act ‘financial year’ in section 3CA means the financial year as defined in section 323D of that Act. This is usually a period of 12 months, not necessarily starting on 1 July.

    For all other corporate tax entities, your annual accounting period for the purposes of the preparation of financial statements is the ‘financial year’ for the purposes of section 3CA.

    The GPFS is for the 'financial year most closely corresponding to the income year' if it is prepared for the financial year most recently concluded on or before the end of the income year.

    What is CAAP (where Australian Accounting Standards don't apply)

    International Financial Reporting Standards (IFRS) or accounting standards that are IFRS compliant such as Australian Accounting Standards, and also US generally accepted accounting principles (GAAP), are globally recognised as CAAP.

    Where other accounting principles are used, whether they are CAAP is a question of fact. This can only be determined on a case-by-case basis. One consideration is whether such principles ensure that financial statements provide a true and fair view.

    Foreign residents conducting a business through a permanent establishment

    If you are a foreign resident conducting a business through an Australian permanent establishment (PE), your GPFS must be prepared in accordance with CAAP and must relate to you and incorporate your Australian PE results. Use CAAP unless you are required to prepare financial statements under subsections 601CK(5)-(6) of the Corporations Act. Then you must prepare your GPFS in accordance with Australian Accounting Standards.

    Your GPFS can't be a stand-alone GPFS for your Australian PE. However, we encourage separate measurement and disclosure for your Australian PE in your GPFS.

    A GPFS denominated in a currency other than Australian dollars does not need to be re-denominated into Australian dollars.

    Section 3CA doesn't apply to you if you are a registered foreign company and lodge a GPFS with ASIC within the time provided in subsection 319(3) of the Corporations Act.

    If accounting standards applicable to you in your country do not describe a 'GPFS', we will accept you have lodged a GPFS with ASIC if an appropriately qualified and independent person, such as your auditor, verifies those statements are in substance a GPFS. You don't need to provide us the verification, but need to produce it upon request.

    Members of tax consolidated groups or MEC groups

    If you are a subsidiary member of a tax consolidated group or MEC group, you aren't required to give a GPFS to the Commissioner. However, if you join or leave a tax consolidated group or a MEC group part-way through the income year, you must give us a GPFS where you:

    • meet the conditions for section 3CA to apply to you
    • have an obligation to lodge an income tax return because you weren't a member of a tax consolidated or MEC group for the entire year and were a taxpayer for part of the income year.

    Joining or leaving an accounting consolidated group

    If you join or leave a group that is consolidated for accounting purposes as a single group part-way through an income year, whether you are a SGE for the income year, will depend on whether, at the end of the income year, you either:

    • remain outside of a group and your total annual income for the income year as shown in your global financial statements is A$1 billion or more
    • are part of a group consolidated for accounting purposes as a single group and the annual global income for the income year as shown in the global financial statements prepared by the GPE of the group you have joined is A$1 billion or more.

    Your membership of a group you left during the income year is not relevant in determining whether you are a SGE for the income year. This is because paragraph 960-555(2)(a) of the ITAA 1997 simply requires you to be a current member of a group of entities that are consolidated for accounting purposes as a single group.

    SGE for the income year

    You are a SGE if annual global income for the income year is A$1 billion or more for either:

    • you as a global parent entity (GPE) as defined in section 960-560 of the ITAA 1997
    • your GPE which consolidates for accounting purposes a group of entities including you.

    The annual global income of a GPE for an income year is the total annual income of the GPE or all the members of the group consolidated by the GPE for accounting purposes, as shown in the latest global financial statements for the income year.

    The definition of income under Australian Accounting Standards includes revenue, extraordinary income, gains from investment activities and other inflows that go to the determination of the profit or loss. Thus, the annual global income is the total of income that goes to the determination of profit or loss in accordance with AASB 101, as shown on the global financial statements.

    While the definition of income also encompasses other comprehensive income, annual global income does not include other comprehensive income, as it does not go to the determination of profit or loss.

    The latest global financial statements for the GPE for an income year are financial statements (whether stand-alone or consolidated):

    • prepared and audited in accordance with Australian Accounting Standards and auditing principles
    • covering the most recent period (not necessarily the income year) ending within 24 months before the end of the income year.

    If Australian Accounting Standards and auditing principles do not apply in relation to a GPE, its global financial statements (whether stand-alone or consolidated) must be prepared and audited. This must be in accordance with commercially accepted principles relating to accounting and auditing that ensure the financial statements give a true and fair view of the financial position and performance of the GPE. Section 960-570 of the ITAA 1997 defines the term 'global financial statements' for the purposes of determining whether an entity is a SGE.

    Transitional administrative approach

    You may use our transitional administrative approach if you are experiencing difficulties in preparing your GPFS in accordance with Australian Accounting Standards.

    This approach applies to a GPFS in respect of your income year that commenced between 1 July 2016 and 30 June 2017.

    See also:

    When to lodge your GPFS with us

    Your GPFS must be for the financial year most closely corresponding to your income year. You need to give us your GPFS on or before the day you are required to lodge your income tax return.

    How to lodge your GPFS

    You attach your GPFS to the approved form and lodge it online via the Business Portal or Tax Agent Portal.

    If you are a member of a group consolidated for accounting purposes, to satisfy your obligations under section 3CA you will need to give us a GPFS even if another member of your group also gives the same GPFS.

    We are continuing to explore ways to minimise any overlapping lodgment obligations.

    Administrative relief for late lodgment with ASIC

    You can notify us if you lodge a GPFS with ASIC after the time provided in subsection 319(3) of the Corporations Act, but before the due date for lodgment of your income tax return. In such instances, we will consider that you have satisfied your obligation to give us a GPFS.

    Application of administrative penalties

    If you fail to give a GPFS to us in the approved form on or before the due date for lodgment of your income tax return you will be liable to an administrative penalty. These penalties may apply irrespective of any penalty imposed under the Corporations Act.

    See also:

    Worked examples

    Example 5 – entering an accounting and tax consolidated group

    Example 5 – entering an accounting and tax consolidated group

    As at 30 October 2017, C Coy is the head company of a tax consolidated group comprising C Coy and Sub C Coy. C Coy is also the ultimate Australian parent and is not an investment entity for accounting purposes. On 31 October 2017, Sub C Coy purchases D Coy and D Coy joins the tax consolidated group. Further, the group comprising C Coy, Sub C Coy and D Coy is a reporting entity for accounting purposes.

    All entities in Group A use a financial reporting period and substitute accounting period (SAP) ending 31 December. All onshore entities in Group A are grandfathered large proprietary companies.

    C Coy, Sub C Coy and D Coy are consolidated into Overseas Coy’s financial statements for the financial reporting period ending 31 December 2017 and the consolidated financial statements show an income of more than A$1 billion. As such C Coy, Sub C Coy and D Coy are SGEs for the 2017–18 income year.

    C Coy, Sub C Coy and D Coy are required to prepare financial reports under Part 2M.3 of the Corporations Act. As such, Australian Accounting Standards apply in relation to C Coy, Sub C Coy and D Coy. C Coy prepares consolidated financial statements. None of the entities lodges a GPFS with ASIC for the financial reporting period ending 31 December 2017.

    C Coy is required to give the Commissioner a GPFS for the 2017–18 income year. As C Coy is a member of Group A that is consolidated for accounting purposes, C Coy can prepare a stand-alone GPFS or a consolidated GPFS that consolidates Sub C Coy and D Coy under paragraph 3CA(5)(b).

    If it prepares a stand-alone GPFS, C Coy is required to prepare it in accordance with AASB 127 - separate financial statements to account for C Coy’s investment in its subsidiaries.

    For a parent entity, separate financial statements prepared in accordance with AASB 127 are statements in addition to consolidated financial statements prepared by the entity unless it is exempt from consolidation under AASB 10. As C Coy is the ultimate Australian parent and the group comprising C Coy, Sub C Coy and D Coy is a reporting entity, the exemption in paragraph 4 of AASB 10 does not apply to C Coy (see, in particular paragraph Aus4.2 of AASB 10).

    As such, C Coy can prepare a stand-alone GPFS, as separate financial statements in accordance with AASB 127, in addition to consolidated financial statements already prepared by C Coy under AASB 10. C Coy also needs to identify in the separate GPFS the consolidated financial statements it prepared, and comply with the other measurement and disclosure requirements in AASB 127 when preparing the separate GPFS. We understand that such consolidated financial statements would typically be presented as additional columns alongside the separate financial statements prepared, with an accounting policy note stating that the entity is the parent entity.

    Alternatively C Coy may give us a consolidated GPFS, which consolidates both Sub C Coy and D Coy in accordance with AASB 10.

    Sub C Coy is not required to give the Commissioner a GPFS as it is a subsidiary member of a tax consolidated group and is not required to lodge an income tax return.

    D Coy is required to give the Commissioner a GPFS for the 2017–18 income year, because it is an SGE, and is required to lodge an income tax return as it was not a member of a tax consolidated group for part of the year. As D Coy is a member of Group A, it can give a stand-alone GPFS or the consolidated GPFS prepared by C Coy. If D Coy prepares a stand-alone GPFS, it is not required to apply AASB 127 given it has no investment in subsidiaries. D Coy is not required to prepare consolidated financial statements as AASB 10 does not apply.

    C Coy and D Coy may elect to adopt our transitional administrative approach for the 2017–18 income year (being an income year that commenced between 1 July 2016 and 30 June 2017) and give the Commissioner a consolidated GPFS prepared by Overseas Coy, in accordance with CAAP. Following the transitional administrative approach period, C Coy and D Coy will not be able to give the consolidated financial statements prepared by Overseas Coy unless those consolidated financial statements are prepared in accordance with Australian Accounting Standards.

    Example 6 – exiting an accounting and tax consolidated group

    Example 6 – exiting an accounting and tax consolidated group

    As at 30 October 2018, E Coy is the head company of a tax consolidated group comprising E Coy, Sub E Coy and F Coy. E Coy is also the ultimate Australian parent and is not an investment entity for accounting purposes. Further, the group comprising E Coy, Sub E Coy and F Coy is not a reporting entity for accounting purposes.

    On 31 October 2018, Sub E Coy undertakes a demerger by transferring all of its shares in F Coy to the shareholders of its ultimate parent (Foreign Coy) and F Coy leaves the tax consolidated group. Foreign Coy also loses control of F Coy for accounting purposes as a result of the demerger.

    All entities in Group B and F Coy use a financial reporting period and SAP ending 31 December.

    E Coy and Sub E Coy are consolidated into Foreign Coy’s financial statements for the financial reporting period ending 31 December 2018. Foreign Coy’s consolidated financial statements show an income of more than A$1 billion, and as such E Coy and Sub E Coy are SGEs for the 2018–19 income year.

    Consolidation of F Coy by Foreign Coy for accounting purposes ceased in accordance with accounting standards applied in Foreign Coy’s country after F Coy was demerged. As such, F Coy is no longer a member of Group B that is consolidated for accounting purposes, for the purposes of paragraph 960-555(2)(a) of the ITAA 1997. F Coy’s financial statements show an income of less than A$1 billion for the year ended 31 December 2018 and as such F Coy is not a SGE for the 2018–19 income year.

    E Coy, Sub E Coy and F Coy are required to prepare financial reports under Part 2M.3 of the Corporations Act. As such, Australian Accounting Standards apply in relation to these entities. None of the entities lodge a GPFS with ASIC for the financial reporting period ending 31 December 2018.

    E Coy is required to give the Commissioner a GPFS for the 2018–19 income year. As E Coy is a member of Group B, E Coy can prepare a stand-alone GPFS or a consolidated GPFS that consolidates Sub E Coy under paragraph 3CA(5)(b).

    If it prepares a stand-alone GPFS, E Coy is required to prepare it in accordance with AASB 127 to account for E Coy’s investment in Sub E Coy.

    The group comprising E Coy and Sub E Coy is not a reporting entity, and E Coy’s ultimate parent (Foreign Coy) produces consolidated financial statements that are available for public use and comply with IFRS. As such, while E Coy is the ultimate Australian parent it can avail itself of the exemption provided in paragraph four of AASB 10, from preparing consolidated financial statements, provided all other conditions for the exemption to apply are satisfied. As such, when it prepares a stand-alone GPFS in accordance with AASB 127, it must make the necessary disclosures in those statements including the address where the consolidated financial statements of its ultimate parent (Foreign Coy) are obtainable (see, in particular paragraph 16 of AASB 127).

    If E Coy instead prepares a consolidated GPFS, this statement needs to consolidate Sub E Coy and be prepared in accordance with the Australian Accounting Standards.

    E Coy is not able to give the consolidated financial statements prepared by Foreign Coy, unless the consolidated financial statements are prepared in accordance with Australian Accounting Standards.

    Sub E Coy is not required to give a GPFS as it is a subsidiary member of a tax consolidated group and is not required to lodge an income tax return.

    While F Coy is required to lodge an income tax return for the 2018–19 income year, as a part-year non-member of a tax consolidated group, it is not required to give the Commissioner a GPFS, because it is not an SGE for that income year.

    Footnote 1
    Relief granted by ASIC may or may not affect your Part 2M.3 obligation.

    Return to footnote 1 referrer

    Footnote 2
    The entity referred to in subsection 3CA(5) (particularly paragraphs (5)(a)(ii) and (5)(b)) is the corporate tax entity that satisfies subsection 3CA(1). It therefore does not follow that subsection 3CA(5) can be read in such a way that you could have regard to the entity for which the financial report is prepared to determine whether your GPFS needs be prepared in accordance with Australian Accounting Standards or CAAP.

    Return to footnote 2 referrer

    Last modified: 28 Sep 2017QC 53403