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  • Section C: Category C reportable tax positions

    You need to disclose Category C reportable tax positions in section C.

    The questions will tell you if you need to consider materiality. If the question doesn't include any materiality criteria you must disclose a Category C reportable tax position if the arrangement, transaction or circumstances covered by the question is relevant for your entity.

    Unless otherwise specified, the questions refer to arrangements or transactions in place at any time in the income year covered by the tax return the schedule accompanies.

    Category C questions referencing a taxpayer alert may ask you to disclose arrangements that either:

    • have particular characteristics, in which case you must disclose the arrangement even when either  
      • your arrangement is not covered by the examples in the taxpayer alert
      • the mischief described by the taxpayer alert is not present in your arrangement
       
    • are described in the taxpayer alert, in which case you must interpret the question widely and make a disclosure even if  
      • some features of your entity's arrangement are different to those described in the examples in the relevant taxpayer alert
      • your entity's arrangement doesn't contain all features of the arrangement(s) described in the taxpayer alert
      • you don't view the arrangement as aggressive, inappropriate, contrived or artificial
      • you don't consider a tax benefit arose from the arrangement
      • there is an observable third-party market or long-standing practice for this arrangement.
       

    Did you have any Category C reportable tax positions for the 2020–21 income year?

    You must confirm if your entity has any Category C disclosures.

    If you select No go to Section D: Declaration and signature.

    If you select Yes – the next question will ask how many Category C reportable tax positions you are reporting.

    How many Category C reportable tax positions are you reporting?

    Enter the total number of Category C reportable tax positions you are reporting.

    You will need to follow the instructions for answering individual Category C questions to ensure you make a complete disclosure.

    Using the PDF schedule

    If you are completing the PDF version, once you enter the number of reportable tax positions you are disclosing and move off the field, the document will automatically display the required number of fields to make the disclosures.

    You must complete all the mandatory fields for each reportable tax position you are reporting.

    Have you discussed this position with the ATO?

    You must confirm if you (or another representative of your entity) have previously discussed the disclosure with us, for each disclosure you are making. All fields must be completed for each disclosure you are making, no matter what answer you provide to this question.

    RTP Category C question and subcategory

    Enter the number of the Category C question you are disclosing under in the RTP Category C question field. If there are subcategories, enter the relevant subcategory in the RTP Category C subcategory field.

    If your entity has multiple positions covered by a single question, the question will tell you how to disclose this. You may need to select the appropriate subcategory or make a disclosure for each position.

    For all Category C questions, you must make a disclosure if, at any time during the year, your entity had an arrangement covered by a question. If the arrangement is no longer in place at the time of preparing your entity's tax return, note this in the Comments field.

    Question 1

    Did your entity claim a deduction under section 25-90 of the Income Tax Assessment Act 1997 (ITAA 1997) (or subsection 230-15(3) of the ITAA 1997 if you are a TOFA taxpayer) that was incurred in earning income that is non-assessable and non-exempt under both section 23AH of the Income Tax Assessment Act 1936 (ITAA 1936) and section 768-5 of the ITAA 1997?

    Refer to Taxation Determination TD 2016/6 for more guidance.

    Question 2

    Did your entity fund a special dividend or a share buy-back through an equity raising event at a similar time, where the arrangement is a type, or variation, of an arrangement described in Taxpayer Alert TA 2015/2?

    Question 3

    Has your entity entered into an arrangement(s), or variation of an arrangement, described in Taxpayer Alert TA 2015/5 involving the use of offshore entities that source goods (procurement hubs)?

    Question 4

    Question removed due to impacts of legislative changes.

    Question 5

    Question removed as the information is collected through other means.

    Question 6

    Has your entity entered into a related party foreign currency denominated finance transaction(s) with related party cross-currency interest rate swaps using an arrangement(s), or variation of an arrangement, described in Taxpayer Alert TA 2016/3?

    Question 7

    If your entity entered into or varied any cross-border leasing arrangements involving the use, in Australian waters, of non-resident-owned mobile offshore drilling units (MODUs), disclose the outcome you have self-assessed using Practical Compliance Guideline PCG 2020/1.

    • Subcategory 1: white zone
    • Subcategory 2: green zone
    • Subcategory 3: amber zone
    • Subcategory 4: red zone
    • Subcategory 5: if your entity's related party arrangement didn't involve the use, in Australian waters, of MODUs
    • Subcategory 6: if you have not applied PCG 2020/1.

    PCG 2020/1 outlines that MODUs include:

    • drill-ships
    • drilling rigs (including but not limited to submersibles, semi-submersible and jack-up rigs)
    • pipe-laying vessels
    • heavy-lift vessels.

    Enter the relevant subcategory number in the RTP Category C subcategory field.

    Question 8

    If your entity is an Australian income tax consolidated group, does it have an offshore permanent establishment that has allocated expenses associated with an intra-Australian group transaction, where the circumstances of the arrangement(s) are the same or similar to those described in Taxpayer Alert TA 2016/7?

    Question 9

    If your entity has related party dealings involving a centralised services hub arrangement(s), disclose the outcome you have self-assessed using the applicable schedule in Practical Compliance Guideline PCG 2017/1 for each hub arrangement your entity is involved in.

    For offshore marketing hub arrangements:

    • Subcategory 1: white zone
    • Subcategory 2: green zone
    • Subcategory 3: blue zone
    • Subcategory 4: yellow zone
    • Subcategory 5: amber zone
    • Subcategory 6: red zone
    • Subcategory 7: red zone, did not apply ATO risk methodology or calculate tax impact.

    For offshore non-core procurement hub arrangements:

    • Subcategory 11: white zone
    • Subcategory 12: green zone
    • Subcategory 13: blue zone
    • Subcategory 14: yellow zone
    • Subcategory 15: amber zone
    • Subcategory 16: red zone
    • Subcategory 17: red zone, did not apply ATO risk methodology or calculate tax impact.

    Enter the relevant subcategory number in the RTP Category C subcategory field.

    In the comments section, provide the goods or commodities sourced from Australia and sold through the marketing hub arrangement, for each disclosed arrangement.

    If the arrangement has been subject to any review by us, provide the Siebel reference number in the Comments field. The Siebel reference number can be found in the top right corner of correspondence from us related to the review. It may also be referred to as our reference.

    If the arrangement has been discussed with us, outside of a formal review product, provide details of the discussion in the Comments field.

    Question 10

    Has your entity excluded from its thin capitalisation calculations of debt capital any value of a debt interest that has been treated wholly, or partly, as equity under accounting standards?

    Refer to Taxpayer Alert TA 2016/9 and Taxation Determination TD 2020/2 for more guidance.

    Question 11

    Is your entity currently involved in a cross-border, round robin financing arrangement(s) using an arrangement, or variation of an arrangement, described in Taxpayer Alert TA 2016/10?

    Question 12

    Was your entity party to an arrangement separating an integrated trading business into parts that results in trading income being re-characterised into more favourably taxed passive income?

    Refer to Taxpayer Alert TA 2017/1 for more guidance.

    Question 13

    Has your entity claimed the R&D tax incentive using an arrangement, or variation of an arrangement, described in the subcategories below?

    • Subcategory 1: Taxpayer Alert TA 2017/2 (construction activities)
    • Subcategory 2: Taxpayer Alert TA 2017/3 (any business activities)
    • Subcategory 3: Taxpayer Alert TA 2017/4 (agricultural activities)
    • Subcategory 4: Taxpayer Alert TA 2017/5 (software development activities)
    • Subcategory 5: More than one of the above taxpayer alert subcategories applies.

    Enter the relevant subcategory number in the RTP Category C subcategory field.

    If more than one taxpayer alert subcategory applies, enter the relevant taxpayer alerts in the Comments field.

    Question 14

    If your entity has a cross-border related party finance arrangement(s), disclose the outcome you have self-assessed using PCG 2017/4, Schedule 1 and/or Schedule 3 for the three most material arrangements.

    If your entity has a cross-border related party finance arrangement with a higher risk rating to the three already disclosed, you must also disclose this arrangement.

    Materiality is determined by the Loan amount in Australian dollar equivalent. It should be determined using the instructions to question 11 of the International dealings schedule.

    For related party debt funding arrangements under Schedule 1:

    • Subcategory 1: white zone
    • Subcategory 2: green zone
    • Subcategory 3: blue zone
    • Subcategory 4: yellow zone
    • Subcategory 5: amber zone
    • Subcategory 6: red zone
    • Subcategory 7: if you have not applied Schedule 1.

    For interest-free loans under Schedule 3:

    • Subcategory 11: white zone
    • Subcategory 12: green zone
    • Subcategory 13: blue zone
    • Subcategory 14: yellow zone
    • Subcategory 15: amber zone
    • Subcategory 16: red zone
    • Subcategory 17: if you have not applied Schedule 3.

    Enter the relevant subcategory number in the RTP Category C subcategory field.

    For each of the arrangements disclosed, provide in the Comment field:

    • the Australian dollar equivalent loan amount
    • if the arrangement is an outbound or inbound loan.
    Question 15

    Question removed as the information is collected through other means.

    Question 16

    If your entity is an Australian income tax consolidated, or multiple entry consolidated (MEC) group, has it entered into any arrangement(s) where either of the following subcategories apply:

    • Subcategory 1: the churning rule (in section 716-440 of the ITAA 1997) applies to deny certain cost setting rules
    • Subcategory 2: the churning rule didn't apply because your entity didn't satisfy the test in paragraph 716-440(1)(f), as there is no change in the majority economic ownership of the joining entity within the 12-month period before the joining time.

    Enter the relevant subcategory number in the RTP Category C subcategory field. Enter the number 1 if both subcategories apply where your entity has two separate positions.

    If subcategory 2 applies to your entity's arrangement, in the Comments field provide details explaining how the arrangement didn't satisfy the test in paragraph 716-440(1) (f).

    Question 17

    At any stage during the income year, did your entity have a cross-border financing arrangement(s) with an international related party (including via back-to-back arrangements through third parties) where it claimed a tax deduction for interest, or an amount in the nature of interest, and interest withholding tax wasn't remitted because a withholding tax liability isn't expected to arise within the next 18 months.

    Refer to Taxpayer Alert TA 2018/4 for more guidance.

    Question 18

    Did your entity claim a deduction under section 25-90 of the ITAA 1997 (or subsection 230-15(3) of the ITAA 1997 if you are a TOFA taxpayer) for costs in relation to debt interests incurred in deriving non-assessable non-exempt income under sections 23AI or 23AK of the ITAA 1936 or Subdivision 768-A of the ITAA 1997?

    Refer to Taxpayer Alert TA 2009/9 for more guidance.

    Question 19

    If your entity has reached a formal settlement agreement or future compliance arrangement with us for the current income year, do either of the following subcategories apply:

    • Subcategory 1 – your entity breached one or more of the terms of the settlement deed or future compliance arrangement
    • Subcategory 2 – changes in the relevant and material facts, as disclosed in the deed or arrangement, have occurred.

    Enter the relevant subcategory number in the RTP Category C subcategory field. Enter the number 1 if both subcategories apply where your entity has two separate positions.

    In the Comment field, provide the Siebel reference number for the settlement agreement or forward compliance arrangement. The Siebel reference number can be found in the top right corner of correspondence from us related to the settlement or agreement. It may also be referred to as our reference.

    Question 20

    Has your entity participated in any arrangement(s) using securities lending and derivative contracts where your entity, or another participant, has received franking credits using an arrangement, or variation of an arrangement, described in Taxpayer Alert TA 2018/1?

    Question 21

    Are you aware of any unamended mistakes or omissions in any single tax return lodged by your entity within four years of the lodgment date of this RTP schedule where, if all mistakes or omissions in that return are amended, it would result in either:

    • more than $1.5 million in tax being payable (or would have been payable had it not been offset, for example by losses from prior years)
    • more than $5 million in losses (including capital losses).

    For the purposes of this calculation, only count mistakes and omissions your entity hasn't previously notified to us.

    In the Comments field, provide details of the mistake(s) or omission(s), the:

    • tax return(s) the mistake(s) or omission(s) applies to
    • nature of the mistake(s) or omission(s)
    • amount of tax payable or losses the mistake(s) or omission(s) would result in.
    Question 22

    If your entity has restructured out of any arrangement(s) in the current year to which the hybrid mismatch rules applied, or would have applied had the arrangement(s) remained in place, disclose the subcategory that describes your entity's current position:

    • Subcategory 1 – all restructured arrangements qualify as low risk under Practical Compliance Guideline PCG 2018/7.
    • Subcategory 2 – one or more of the restructured arrangements don't qualify as low risk under Practical Compliance Guideline PCG 2018/7.

    In considering whether the hybrid mismatch rules would apply you must disregard dual inclusion income.

    Enter the relevant subcategory number in the RTP Category C subcategory field.

    For arrangements that aren't low risk, in the Comment field provide:

    • details of the restructured arrangement
    • basis on which the arrangement didn't qualify as low risk under PCG 2018/7.
    Question 23

    If your entity has a related party derivative arrangement(s), disclose the outcome you have self-assessed using PCG 2017/4, Schedule 2 for the three most material arrangement(s).

    If your entity has a related party derivative arrangement with a higher risk rating than the three already disclosed, you must also disclose this arrangement.

    Materiality is determined by the hedged item amount in Australian dollar equivalent.

    • Subcategory 1: white zone
    • Subcategory 2: green zone
    • Subcategory 3: blue zone
    • Subcategory 4: yellow zone
    • Subcategory 5: amber zone
    • Subcategory 6: red zone
    • Subcategory 7: if you have not applied Schedule 2.

    Enter the relevant subcategory number in the RTP Category C subcategory field.

    For each red and amber arrangement disclosed, provide in the Comment field:

    • the underlying transaction hedged by the derivative, including the loan quantum in Australian dollar equivalent
    • the commercial and operational reasons for borrowing in a foreign currency
    • the name and location of the counterparty for the derivative and hedged item.
    Question 24

    If your entity has related party dealings involving an inbound distribution arrangement(s), in the RTP Category C subcategory field enter either:

    • 3 where your entity hasn't self-assessed the risk zone of the arrangement(s) using PCG 2019/1  
      • If your entity has adopted the distributor simplified transfer pricing record keeping option in PCG 2017/2, record PCG 2017/2 applied in the Comments field.
      • If paragraph 49 of PCG 2019/1 applies to your entity's arrangements, record in the Comments field which exclusion categories (from paragraph 49) apply.
       
    • the appropriate number from the table below, where your entity has self-assessed the risk zone of the arrangement(s) using PCG 2019/1.
    RTP Category C subcategory field – risk assessment ratings

    Category

    Low
    risk

    Medium
    risk

    High
    risk

    General distributor – Schedule 1 (not in an industry sector specifically covered by a separate schedule)

    11

    12

    13

    Category 1 Life science industry – Schedule 2

    21

    22

    23

    Category 2 Life science industry – Schedule 2

    31

    32

    33

    Category 3 Life science industry – Schedule 2

    41

    42

    43

    Category 1 ICT industry – Schedule 3

    51

    52

    53

    Category 2 ICT industry – Schedule 3

    61

    62

    63

    Motor vehicles industry – Schedule 4

    71

    72

    73

    Select the industry sector you believe best describes the industry in which your entity operates. If the schedule for this industry sector has different categories of activities that generate value, select the category you believe best reflects your entity's inbound distribution arrangement.

    Calculate your entity's five-year weighted average EBIT margin based on financial information without making adjustments for comparability purposes. This reflects how the profit markers in PCG 2019/1 have been constructed.

    If your entity hasn't lodged tax returns for each of the five preceding income years, calculate the EBIT margin on a weighted average over the preceding years of consecutive lodgements.

    If your entity has an inbound distribution arrangement but you can’t determine an EBIT margin for the arrangement, you should answer with Subcategory 3 indicating you didn't apply PCG 2019/1.

    Question 25

    Has your entity claimed deductions for expenses incurred under an arrangement(s) with offshore parties and used intangible assets held by an offshore party in connection with this arrangement(s), where one of the following subcategories applies:

    • Subcategory 1 – the arrangement(s) doesn't appropriately recognise an amount as consideration for the use of the intangible assets.
    • Subcategory 2 – your entity hasn't applied the arm’s length principle in determining the appropriate consideration for the use of the intangible assets.
    • Subcategory 3 – your entity has considered the arm’s length principle in determining the appropriate consideration for the use of the intangible assets, but the arrangement isn't covered by section 284-255 (Taxation Administration Act 1953) compliant transfer pricing documentation.

    Enter the relevant subcategory number in the RTP Category C subcategory field.

    If multiple subcategories apply to a single arrangement, record the lowest subcategory. For example, if both subcategories 1 and 2 apply, record subcategory 1.

    If your entity has more than one arrangement you will need to disclose each arrangement separately, unless the criteria for treating similar arrangements or transactions as a single position apply. In this case, record the number of arrangements in the Comments field.

    Refer to Taxpayer Alert TA 2018/2 for more guidance.

    Question 26

    If your entity is a multiple entry consolidated (MEC) group, has it entered into an arrangement(s), or variation of an arrangement, described in Taxpayer Alert TA 2019/1, where a group CGT asset (with a large unrealised capital gain) is sold through an eligible tier 1 company (with significant intra-group debt), which is subsequently sold to a third party who undertakes to extinguish the intra-group debt?

    Question 27

    Has your entity made a payment under a structured arrangement covered by item 1 of the table in subsection 832-615(2) of the Income Tax Assessment Act 1997?

    Refer to LCR 2019/3 and PCG 2019/6 for more guidance.

    In the Comments field, provide a description of the arrangement including the:

    • name and place of incorporation or formation of the offshore deducting entity
    • type of offshore hybrid arrangement and details of tax treatment of the parties to the arrangement in the relevant jurisdictions – for example, in the case of a reverse hybrid, provide the tax treatment for the offshore deducting entity, the reverse hybrid and any investing taxpayers
    • amount of the offshore hybrid mismatch and the amount of deductions disallowed under section 832-610 for the structured arrangement.
    Question 28

    If your entity is a private company that is the head entity of a consolidated group, did any of the consolidated group members (including the head entity) make a loan to the head entity's shareholders or their associates that are external to the consolidated group where all of the following apply:

    • the loan is not compliant with the terms of 109N
    • the loan was not repaid by the lodgment date
    • no statement has been provided to the recipient advising of a deemed dividend.

    Refer to Taxation Determinations TD 2004/68 and TD 2018/13 for more guidance.

    Question 29

    Has your entity been part of an arrangement described by either:

    • Subcategory 1: Your entity has subscribed for a controlling share of units in a unit trust (where they did not own a controlling share in the prior year), which had a debt to another party that was the trust’s associate before the subscription and where the proceeds of the subscription were used to repay the debt?
    • Subcategory 2: Your entity has or had an associate unit trust which, in the current or four previous income years, transferred assets into a second unit trust relying on CGT rollover relief under Subdivision 126-G of ITAA 1997, and where the unitholding(s) in the second trust has subsequently changed to the extent that it is no longer your associate?

    Refer to Taxpayer Alert TA 2019/2 for more guidance.

    Enter the relevant subcategory number in the RTP Category C subcategory field.

    Enter the number 2 if both subcategories apply.

    Question 30

    If your entity is a private company and more than 10% of its issued shares are owned by a single shareholder acting as a trustee of a trust, do any of the subcategories below apply?

    • Subcategory 1: There was a change of trustee during the year that was not in connection with a trust split, or your entity does not know if there was a trust split.
    • Subcategory 2: There was a change of trustee during the year that was in connection with a trust split.

    Refer to Taxation Determination TD 2019/14 for more guidance.

    Enter the relevant subcategory number in the RTP Category C subcategory field.

    Enter the number 2 if both subcategories apply.

    Question 31

    In the current, or four prior income years, has your entity, or an entity your entity controls, claimed a full credit or offset for foreign income tax paid where less than 100% of the related foreign income (including capital gains) is included in their Australian assessable income?

    Refer to the decision in Burton v Commissioner of Taxation and ATO Interpretative Decision ATO ID 2010/175 for more guidance.

    Question 32

    Has your entity entered into any arrangement(s), or variation of an arrangement, described in Taxpayer Alert TA 2020/1, involving non-recognition or mischaracterisation of Australian activities connected with the development, enhancement, maintenance, protection or exploitation (DEMPE) of intangible assets?

    In the Comments field, provide a brief:

    • description of the arrangement(s), outlining their legal form
    • description of the intangible assets involved in any arrangement(s) including the connected DEMPE activities
    • explanation of the commercial and business rationale for entering into the arrangement(s).
    Question 33

    Has your entity entered into any arrangement(s) or scheme(s), or variation of an arrangement, described in Taxpayer Alert TA 2020/2, where the structure used by a foreign investor(s) to invest directly into an Australian business has been mischaracterised?

    In the Comments field, provide:

    • the foreign investor's identity
    • a brief description of what features, if any, aren't consistent with vanilla debt or equity investments
    • a brief explanation of how the investment provides the foreign investor with any direct exposure to the economic return from a particular business or assets exploited in the business.
    Question 34

    Has your entity entered into any arrangement(s), or variation of an arrangement, described in Taxpayer Alert TA 2020/3 and claimed a deduction for interest expenses under an arrangement with a non-resident related party?

    Question 35

    Has your entity entered into an arrangement, or a variation of an arrangement, described in Taxpayer Alert TA 2020/4 involving the transfer of assets within a MEC group and an ET-1 company leaving the MEC group or an ET-1 company anticipated to the leave the MEC group in future?

    Question 36

    Has your entity entered into any arrangement(s), or variation of an arrangement, described in Taxpayer Alert TA 2020/05 and obtained imputation benefits relating to a parcel of Australian shares it holds (either directly or indirectly) where it has offset its economic exposure to those shares, or an Australian equities index, through the use of a derivative instrument(s)?

    Question 37

    If your entity is a non-ADI and has relied on the arm’s length debt test to determine its maximum allowable debt amount, disclose the outcome you have self-assessed using Practical Compliance Guideline PCG 2020/7.

    Outward investing non-ADI:

    • Subcategory 1: white zone
    • Subcategory 2: low risk zone
    • Subcategory 3: low to moderate risk zone
    • Subcategory 4: medium risk zone
    • Subcategory 5: high risk zone
    • Subcategory 6: if you have not applied PCG 2020/7

    Inward investing non-ADI:

    • Subcategory 11: white zone
    • Subcategory 12: low risk zone
    • Subcategory 13: low to moderate risk zone
    • Subcategory 14: medium risk zone
    • Subcategory 15: high risk zone
    • Subcategory 16: if you have not applied PCG 2020/7

    Regulated utility, as defined in paragraphs 38 and 39 of PCG 2020/7:

    • Subcategory 21: white zone
    • Subcategory 22: low risk zone
    • Subcategory 23: low to moderate risk zone
    • Subcategory 24: medium risk zone
    • Subcategory 25: high risk zone
    • Subcategory 26: if you have not applied PCG 2020/7

    Enter the relevant subcategory number in the RTP Category C subcategory field.

    Question 38

    If your entity has an arrangement covered by a final practical compliance guideline (PCG) published after these instructions and not the subject of a Category C question, you must disclose this arrangement if it falls within the high risk zone of the PCG or you haven't applied the PCG.

    Refer to ATO advice and guidance 2021 completed issues to identify PCGs published. You only need to report your risk rating for PCGs covering income tax matters.

    In the Comments field, provide:

    • the number of the PCG
    • details of the arrangement
    • if the arrangement falls within the high-risk zone or if you haven't applied the PCG to self-assess the risk rating of the arrangement.

    Comments

    Some questions specify the information you must provide in this field.

    If a question doesn't require information in the Comments field, we encourage you to briefly explain your entity's arrangements. Doing so may mean we:

    • don't need to contact you for more information
    • can ask more targeted questions, if we do require more information.
    Using the PDF schedule

    The field accepts 3,000 characters or approximately 500 words. You can attach additional information if required.

    Once information has been entered, the field will expand when you click on another field. You will then be able to see all the text in the Comments field.

    Last modified: 25 Aug 2021QC 65144