Show download pdf controls
  • Large Business Stewardship Group key messages 20 November 2017

    Diverted profits tax (DPT)

    Issue raised by external stakeholders

    • Practical Compliance Guideline (PCG) for DPT intended for July 2017 but not yet delivered.

    Key messages

    • The PCG seeks to complement the broader suite of DPT guidance products that are being released in the near future (as outlined below).
    • Final PSLA will be published with the draft Law Compliance Guideline (LCG) very shortly. The draft LCG will be available for public comment for up to eight weeks.
    • The ATO has engaged with industry leads in the development of the PCG, particularly in respect to the Sufficient Economic Substance examples and the engagement strategy. This has led to additional time being required to prepare the draft PCG.

    General purpose financial statements

    Issue raised by external stakeholders

    • Briefing on guidance and confirmation whether guidance will have any impact on Australian multinationals and Australia subsidiaries of Australian firms.

    Key messages

    • The ATO published guidance including a transitional administrative approach on 28 September 2017.
    • The ATO opened further consultation at that time seeking details of additional issues that may arise given the complexities of account preparations for Significant Global Entities (SGE) in their global operations. We are currently working through the submissions received. This includes seeking external counsel advice on the primary issue raised (ie how parent accounts prepared in accordance with home country accounting standards can also be Australian Accounting Standards compliant).

    Corporate Tax Transparency 2015–16

    Issue raised by external stakeholders

    • Confirming the ATO will be following the same release process as last year (ie there will be no changes in approach that corporates should be made aware of).

    Key messages

    • The ATO will publish the 2015–16 corporate tax transparency report on data.gov.au in early December 2017.
    • This year it will again be one list of all entities over the relevant thresholds (i.e. over $100 million for public and foreign owned entities and over $200 million for Australian privately owned entities).
    • Revised contextual guidance material was published on ato.gov.au in early November and further guidance in the form of analysis of the data will be published at the same time as the report.

    Corporate residency

    Issue raised by external stakeholders

    • Current status following recent limited consultation on the draft PCG.

    Key messages

    • Following further consultation, the draft PCG has been subject to extensive revision to address feedback from the consultation group.
    • The ATO anticipates publishing the revised draft for further and wider consultation in early 2018 (including with members of the LBSG).

    Compliance risks and emerging issues

    Key messages

    • The ATO’s current focus in terms of income tax includes:
      • franking credit trade schemes
      • synthetic hybrids
      • loan backs
      • pharmaceuticals and e-commerce
      • soft commodities and trading hubs.

    Indirect tax

    Key messages

    • Digital services/products registrations – the ATO has received registrations from entities from more than 40 countries.
    • Low value imported goods – the ATO is holding international information sessions for business and tax professionals to inform them about the GST changes for low value imported goods. The sessions will be held in the United States, United Kingdom, Belgium and China.
    • Financial services and insurance/cross-border new measures consultation – the ATO has held three external consultation sessions with the financial services and insurance industry bodies and advisors regarding the impact of the new cross-border GST measures in the industry.
    • GST emerging risks consultation – the ATO has been undertaking consultation with a range of stakeholders in relation to emerging risks in the GST environment. Some emerging risks identified so far include robotics, gambling and apportionment, mergers and acquisitions and structuring rules.

    Justified Trust, Key taxpayer engagement, Top 100/1,000 programs

    Issue raised by external stakeholders

    • Initial insights from the joint ATO/CTA workshops.

    Key messages

    • The CTA and the ATO have been co-hosting a number of collaborative workshops around major capital cities, with a focus on the Justified Trust, Key Taxpayer Engagement, Top 100 and Top 1,000 programs. Over 172 CTA members representing more than 100 corporates and about 300 ATO staff have attended the jointly sponsored workshops.
    • The ATO has also been running joint staff briefing sessions following the workshops during which many issues are discussed at an operational level, including how Justified Trust is applied in practice. About 450 staff from Public Groups and International and Indirect Tax have attended these sessions.
    • The workshops provided CTA members and ATO staff with the opportunity to obtain a shared understanding of the objectives of these programs including how they are being implemented, and the types of service and assurance activities clients will experience.
    • The ATO and the CTA will be preparing a joint document responding to the themes that have come out of the workshops to share with clients.
    • The ATO will also be running sessions for the large professional advisory firms in early December 2017.

    Accounting standards

    Issue raised by external stakeholders

    • There are some significant changes to the accounting standards coming which are likely to materially impact some large taxpayers – particularly relating to revenue recognition and leases. Revenue recognition is likely to give rise to significant changes in accounting revenue recognition for some taxpayers with significant transitional adjustments on implementation where income either drops out, or is double recognised (with offsetting adjustment to retained earnings). What work has the ATO done on these changes, and what guidance is going to be issued particularly relating to changes in accounting revenue recognition?

    Key messages

    • IFRS 16 (leases) will take effect for accounting periods commencing on or after 1 January 2019. Potential tax impacts include accounting profits and the ability to pay dividends, along with recognition of assets and liabilities for thin capitalisation purposes.
    • IFRS 15 (revenue recognition) will take effect for accounting periods commencing on or after 1 January 2018. Potential tax impacts include treatment of transitional adjustments to retained earnings and ongoing revenue recognition for tax purposes.
    • The ATO recognises the issues raised and will work with the AASB (through the AASB/ATO Liaison Group) on the provision of guidance or other practical solutions.

    Health Services Industry

    Key messages

    • An industry update was provided by LBSG member Cochlear Limited. The main issues affecting this innovative health services company include:        
      • R&D tax concession and technology
      • private health insurance changes
      • delays associated with Therapeutic Goods Administration approvals
      • changes to the European Commission Medical Device regulations.

    Tax and Corporate Australia and the Tax Gap

    Issue raised by external stakeholders

    • Brief discussion around the handling (publications, timing, etc) of the release, further tax gap releases.

    Key messages

    • On 11 October 2017, the ATO published web material Tax and Corporate Australia (TACA) about the tax compliance of large corporate groups in Australia and released the large corporate groups income tax gap.
    • For 2014–15, the ATO estimated the net income tax gap for this group to be $2.5 billion or 5.8% of tax payable.
    • An annual refresh of the content will also be undertaken but the content will be updated as required where significant changes occur.

    Country-by-Country (CbC) reporting

    Issue raised by external stakeholders

    • ATO post lodgment processes for CbC reports – how the material is going to be used, minimising the risk of ‘false positive markers’.

    Key messages

    • As at 31 October 2017, the ATO had received 368 Part A Local Files, 14 Part B Local Files, 31 Short Forms, 4 Master Files, 1 CbC Report and 2,258 entities have positively indicated that they are an SGE on their 2017 return.
    • The ATO has undertaken further consultation sessions in Sydney and Melbourne on the reporting of FX gains and losses in the Local File. The ATO will release additional guidance on reporting for FX gains and losses in year 2 and beyond by the end of this calendar year. The guidance will be released as draft to the consultation group so that they may provide any additional feedback before it is finalised.
    • The ATO will use information obtained from the three CbC statements:
      • to enhance our client profiling capability
      • to provide greater levels of assurance that multinationals are paying the right amount of tax
      • to better inform our risk assessment and risk typologies
      • as part of the International Compliance Assurance Programme pilot project.

    Exchange of Information (EOI)

    Issue raised by external stakeholders

    • Status of ATO’s review of EOI protocols.

    Key messages

    • On 29 September 2017, the ATO updated guidance on EOI and centralised the guidance on the website.
    • At this stage, we cannot predict whether there will be a material increase in EOI requests – both inbound and outbound. We are discussing this with Common Reporting Standards early-adopter jurisdictions and will learn from their experience.
      Last modified: 26 Apr 2019QC 54959