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In this section:
Report of entity tax information
Under the income tax transparency reporting requirements, the Commissioner of Taxation will publish Report of entity tax information about:
- Australian public and foreign owned corporate tax entities with total income of $100 million or more, and
- Australian resident private companies with total income of $200 million or more.
The information will be extracted from tax returns and amendments by the relevant entity that have been processed by 1 September in the year following the one being reported and the report will be published around December. For example, information from 2019–20 will be extracted on 1 September 2021 and published around December 2021.
The information you include at items 1, 2 and 3, along with certain income labels, will be used to identify entities for inclusion in the Report of entity tax information.
We use information-matching technology to verify the correctness of tax returns to ensure that all information is fully and correctly declared on the company tax return.
If possible, the company tax return should fully itemise all investment income, rather than including the income in gross business income or profit and loss statements. Failure to do so could result in the company receiving an income discrepancy query letter from us.
Ensure that the company has not quoted an individual’s TFN to a financial institution for any income it intends to declare in a company tax return, or vice versa.
In particular, we will check the following in the 2021 tax returns:
- distributions from partnerships and trusts, including unit trusts
- income and credits for withholding if an ABN has not been quoted against information provided to us by payers
- total salary and wages paid against the PAYG withholding system
- the amount of prior year losses claimed, which will be reconciled with the amounts of losses carried forward on tax returns of earlier years
- dividend and interest income.
Record keeping requirements
If you carry on a business, you must keep records that record and explain all transactions and other acts you engage in that are relevant for any taxation purpose.
In this section:
Record keeping and retention
Subsection 262A(2) of the ITAA 1936 prescribes the records to be kept as including:
- any documents that are relevant for the purpose of ascertaining the person’s income or expenditure
- documents containing particulars of any election, choice, estimate, determination or calculation made by the person for taxation purposes and, in the case of an estimate, determination or calculation, particulars showing the basis on which, and the method by which, the estimate, determination or calculation was made.
You must keep these records for your financial arrangements covered by the Taxation of Financial Arrangements (TOFA) rules even if you are not carrying on a business in relation to those arrangements.
Generally, a company must keep all relevant records for five years after those records were prepared or obtained, or five years after the completion of the transactions or acts to which those records relate, whichever is the later, although this period may be extended in certain circumstances. Keep records in writing and in English; however, you can keep them in an electronic form or on microfiche as long as the records are in a form that we can access and understand to determine your taxation liability (see Taxation Rulings TR 96/7 Income tax: record keeping – section 262A – general principles and TR 2018/2 Income tax: record keeping and access – electronic records).
The company is not expected to duplicate records. If the records that the company normally keeps contain the information specified in these instructions, you do not need to prepare additional records.
For some items on the tax return, these instructions refer to specific record-keeping requirements. In general, the records specified related to instances where the required information may not be available in the normal company accounts. The record-keeping requirements in the instructions indicate the information that the company uses to calculate the correct amounts to declare on the tax return but they are not an exhaustive list of the records that a company maintains.
Prepare and keep the following documents:
- a statement of financial position
- a detailed operating statement
- livestock and produce accounts for primary producers
- notices and elections
- documents containing particulars of any estimate, determination or calculation made for the purpose of preparing the tax return, together with details of the basis and method used in arriving at the amounts on the tax return
- a statement describing and listing the accounting systems and records, for example, chart of accounts that are kept manually and electronically.
If an audit or review is conducted, we may request, and a company is expected to make readily available:
- a list and description of the main financial products (for example, bank overdrafts, bills, futures and swaps) that were used by the company to finance or manage its business activities during the income year
- for companies that have entered into transactions with associated entities overseas
- an organisational chart of the company group structure
- all documents, including worksheets, that explain the nature and terms of the transactions entered into.
The company will be liable to pay interest, in addition to the shortfall amount, if it does not declare the correct amount of taxable income or tax payable. Penalties may also apply. The company is also liable to penalties if it does not keep records, or keeps inadequate records, about business transactions or the items disclosed on the tax return. For guidelines on record-keeping obligations and remission of penalty for failure to keep or retain records, see Law Administration Practice Statement PS LA 2005/2 Penalty for failure to keep or retain records.
Consolidated or MEC groups
Generally, the head company of a consolidated or MEC group must keep records that, among other things, document:
- the choice in writing to form a consolidated group or MEC group
- the process of forming the group
- entries and exits of subsidiary members into and out of the group
- events which result in an entity being no longer eligible to be a head company or provisional head company (PHC)
- consolidation eliminations or adjustments to derive the income tax outcome for the head company of the group.
This would be in addition to those records usually retained to ascertain the income tax liability of the head company.
Recording the choice of superannuation fund
You must keep records to show that you have met your employer obligations about the choice of superannuation fund.
Keeping records for capital gains tax
A company must keep records of everything that affects its capital gains and capital losses for at least five years after the relevant CGT events.
If a company carries forward a net capital loss, the company should generally keep records of the CGT event that resulted in the loss for five years from the year in which the loss was made or four years from the date of assessment for the income year in which the capital loss is fully applied against capital gains, whichever is the longer.
- Guide to capital gains tax 2021
- Taxation Determination TD 2007/2 Income tax: should a taxpayer who has incurred a tax loss or made a net capital loss for an income year retain records relevant to the ascertainment of that loss only for the record retention period prescribed under the income tax law?
For more information about keeping a CGT asset register, see Taxation Ruling TR 2002/10 Income tax: capital gains tax: asset register.
Keeping records for uniform capital allowances and depreciation claims
You generally need to keep records of depreciating assets for as long as you have the asset, and then another five years after you sell, or otherwise dispose of, the asset. Different time periods and requirements apply if:
- the depreciating asset is in a low-value pool
- the depreciating asset is subject to rollover relief.
Failure to provide records when requested in a review or audit may lead to record keeping penalties.
Keeping records of tax losses
If a company incurs tax losses, it may need to keep records longer than five years from the date on which the losses were incurred. Generally, tax losses incurred can be carried forward indefinitely until they are applied by recoupment or, in very limited circumstances, transferred to another group company. When applied, the loss amount is a figure that leads to the calculation of the company’s taxable income in that year. It is in the company’s interest to keep records substantiating this year’s losses until the amendment period for the assessment in which the losses are applied has lapsed (up to four years from the date of that assessment).
- Taxation Determination TD 2007/2 Income tax: should a taxpayer who has incurred a tax loss or made a net capital loss for an income year retain records relevant to the ascertainment of that loss only for the record retention period prescribed under income tax law?
Keeping records for overseas transactions and interests
Keep records of any overseas transactions in which the company is involved, or has an interest, during the income year.
The involvement can be direct or indirect, for example, through persons, trusts, companies or other entities. The interest can be vested or contingent, and includes a case where the company has direct or indirect control of:
- any income from sources outside Australia not disclosed elsewhere on the tax return, or
- any property, including money, situated outside Australia. If this is the case, keep a record of
- the location and nature of the property
- the name and address of any partnership, trust, business, company or other entity in which the company has an interest
- the nature of the interest.
If an overseas interest was created by exercising any power of appointment, or if the company had an ability to control or achieve control of overseas income or property, keep a record of:
- the location and nature of the property
- the name and address of any partnership, trust, business, company or other entity in which the company has an interest.
Private ruling by the Commissioner of Taxation
A private ruling is binding advice that sets out how a tax law applies to a company for a specified scheme or circumstance.
The easiest way to apply for a private ruling is to use one of the approved forms. They help you provide the information we need.
In this section:
Include all relevant information in your application – whether you use one of our application forms or not. You may need to provide supporting documentation.
Where your ruling will require a valuation of something, such as an item of plant, we may refer the matter to a professional valuer to determine the value or to review a valuation report you have provided.
Information you need to provide:
- the entity to whom the ruling is to apply
- a description of the facts relevant to your scheme or circumstance
- relevant supporting documents, such as transaction documents
- questions you want the private ruling to address
- if possible, your own opinion about how the law applies to the questions.
We will tell you if we need additional information. We communicate with you about the progress of your ruling and either give you or, in certain limited circumstances, decline to give you a private ruling.
Publishing your ruling on our website
To ensure the integrity of our advice, we publish an edited version of every private ruling on the ATO Legal database.
Before we publish, we edit each ruling to remove all identifying details. This ensures that your privacy is protected. A copy of the edited version will be included with the ruling for you to review.
If you are concerned that your edited version may still allow you to be identified, contact us within 28 days to discuss these concerns.
- PS LA 2008/4 Publication of edited versions of written binding advice
If you don't agree with the private ruling
You can object to most private rulings in much the same way you can object to a tax assessment.
You can also seek a review of adverse objection decisions on a private ruling by the Administrative Appeals Tribunal or a court. An explanation of review rights and how to exercise them is issued with the private ruling. An objection to a ruling can be lodged within the later of:
- 60 days after receipt of the ruling, or
- four years from the last day allowed for lodging a tax return for the last income year covered by the ruling.
You cannot object to a private ruling if an assessment has occurred covering the same facts and issues. You could, of course, object to the assessment.
Where you have objected to a private ruling, you cannot object to a later assessment about the same matter ruled on, unless the facts have changed.
Can you rely on a private ruling?
A private ruling legally binds us if it applies to you and you rely on it.
If you rely on a private ruling that benefits you – for example, if your tax liability is less, or your grant or benefit amount is greater than it would otherwise have been – we are bound by the ruling even if it is later proved to be incorrect. If the private ruling is incorrect, we can only apply the law correctly if this gives you a more favourable result.
A binding ruling protects you against liability for tax shortfall even if the ruling is incorrect. The false and misleading statement penalty and interest charges are also not applied in these circumstances.
If you choose not to rely on a private ruling and the position you adopt is shown to be incorrect, you'll be required to pay any underpaid tax or repay overpaid grants or benefits. Interest will generally also be payable on that amount. You may also be required to pay a penalty on the underpaid tax or overpaid grant or benefit if you don't have a reasonably arguable position, or have not taken reasonable care.
Amendment under self-assessment
You can alter your taxable income or the amount shown for tax offsets or some credits after you lodge your tax return. You can request an amendment to a tax assessment or lodge an objection disputing an assessment, generally up to four years following the assessment. Your objection must state the full particulars of the issue in dispute.
Penalties, shortfall interest charges, general interest charges
In this section:
The law may impose penalties on companies for:
- having a shortfall amount by understating a tax related liability or over-claiming a credit that is caused by
- making a statement which is false or misleading in a material particular, unless you took reasonable care in connection with the making of the statement
- taking a position that is not reasonably arguable, and the shortfall amount is more than the greater of $10,000 or 1% of the income tax payable for the income year
- making a statement which is false or misleading in a material particular that does not result in a shortfall amount, unless you took reasonable care in connection with the making of the statement
- failing to provide a tax return from which the Commissioner can determine a liability
- obtaining, but for the relevant anti-avoidance provision, a scheme benefit.
The Commissioner may remit all or a part of a penalty. If the Commissioner decides not to remit the penalty in full, he must give written notice to the company of the decision and the reasons for the decision.
Shortfall interest charges
Companies are liable for the shortfall interest charge where their income tax assessment is amended to increase their liability. Generally, the shortfall interest charge accrues on the increase in tax payable from the due date for payment of the original assessment until the day before the assessment is amended.
Shortfall interest charge is calculated at a rate 4% lower than the general interest charge.
The Commissioner may remit all or a part of the shortfall interest charge when it is fair and reasonable to do so.
General interest charges
Companies are liable for the general interest charge where they have:
- not paid tax, penalty or certain other amounts by the due date for payment
- varied their PAYG instalment rate to less than 85% of the instalment rate that would have covered the company’s actual liability for the income year, or
- used an estimate of their benchmark tax that is less than 85% of their actual benchmark tax for the income year.
The Commissioner may remit all or a part of a general interest charge.
Income tax debts must be paid by the due date. For payment options, see How to pay.
In this section:
Paying your tax debt
The tax payable by a company for an income year becomes due and payable on the statutory due date, which is the first day of the sixth month of the following income year, for example, for 30 June balancing companies the statutory due date is 1 December.
The Commissioner may allow later lodgment dates. See Due dates.
A general interest charge is levied on outstanding amounts from the due date for payment. The general interest charge rate for a particular quarter is calculated by adding 7 percentage points to the relevant monthly average yield of 90-day bank accepted bills. The general interest charge rate is updated quarterly.
For more information on the interest charge, phone 13 28 66.
If you can’t pay your tax debt when due
You are expected to organise your affairs to ensure that you pay your debts on time. If you cannot pay the debt on time, you may be able to set up a payment plan to pay in instalments. You need to consider how much you can pay so you can meet each ongoing payment amount, and future obligations.
If you are trying to do the right thing, we're committed to understanding your situation and helping you where possible.
In some instances, we may need to know more about your financial situation and your circumstances. We may also want to know what steps you have taken to obtain funds to pay your tax debt and the steps you are taking to meet future tax debts on time. This is so we can work with you to set up a manageable payment plan that suits both you and us.
Even if you enter into a payment plan to pay late or by instalments, interest may accrue on the unpaid debt.
To propose a payment plan:
- If your debt is $100,000 or less, you can propose a payment plan using the Business Portal or through your registered tax agent or BAS agent or you can phone our automated phone service on 13 72 26.
- If your debt is greater than $100,000 phone 13 11 42 during our operating hours to discuss your options. We recommend to use the payment plan estimator to work out a plan.
Winding down, liquidating or being deregistered
If the company is winding down, liquidating or being deregistered, ensure it has complied with its lodgment, reporting, payment and other administrative obligations.
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Last modified: 16 Feb 2022QC 64886