Show download pdf controls
  • KPMG feedback - Expansion of the Reportable Tax Position Schedule to large private companies and corporate groups consultation paper

    This information is available in PDF (48.35KB)This link will download a file.

    KPMG comments

    General comments

    1. KPMG welcomes the opportunity to comment on the Australian Taxation Office's ("ATO") discussion paper Expansion of the Reportable Tax Position ("RTP'') Schedule to large private companies and corporate groups.
    2. The paper's proposal would result in the RTP obligation impacting corporate groups with similar levels of income in a consistent way, regardless of whether the particular group is private, public or foreign-owned. It is therefore in principle a reasonable step for the ATO to take.
    3. Our view is that the timeframe for the proposed expansion should be deferred by a year, and we also recommend that the ATO should provide additional guidance for taxpayers so that they can avoid unnecessary administrative costs as they self-assess their RTP obligation and start to get to grips with the RTP concepts.
    4. These issues are reflected in our responses to selected consultation questions below.

    Question 1: Does the proposed start time of the income year ended 30 June 2020 give sufficient time to prepare?

    1. We recommend that implementation of the RTP for large private groups be deferred, such that the first RTP Schedule would relate to the year ended 30 June 2021. This assumes that appropriate ATO guidance relevant to private groups would be available prior to 1 July 2020.
    2. The ATO has issued this discussion paper after the income year ending 30 June 2020 has already commenced. Best practice in tax administration is that taxpayers should start a new income year with full knowledge of what their tax reporting obligations for that year will be. This would not be the case where the RTP Schedule was required for the year ended 30 June 2020.
    3. The application of administrative best practice in this respect is particularly important given that the applicability of the new obligation will require self-assessment by the taxpayer, and ATO guidance tailored for the private group sector was not available prior to the commencement of the current income year.

    Question 3: Are there any concerns with applying the income tests?

    1. The ATO should provide additional guidance on how to apply the $250 million and $25 million income tests, using examples that are relevant to large private groups. For example, the total income at label 6S of the tax return of a corporate member of the group may include distributions from a trust or partnership that is also a member of the group, leading to possible double-counting of that income. The ATO should provide guidance on how the RTP income thresholds would apply in such circumstances.
    2. The ATO should provide additional examples of the common private group ownership and shareholder voting structures that it encounters, to assist these groups in identifying the boundaries of their "economic group" for RTP purposes.
    3. RTP's concept of an "economic group" tums broadly on the question of control. Private groups are often characterised by more varied relationships of control than those that occur in public groups. A private company's shares may be more likely to be made up of several classes, having more varied rights and interests than the shares of a public company. It may be very difficult to apply a definition of control that is based on one entity controlling more than fifty percent of the votes that might be cast at an annual general meeting of another entity in determining the boundaries of certain private economic groups. Hence the need for more comprehensive published guidance from the ATO.

    Question 4: Under what circumstances should the ATO provide an exemption for the lodgement of an RTP schedule?

    1. The ATO should provide a lodgement exemption where, but for discretionary trust or partnership distributions, the company or group would be below the relevant income threshold.
    2. The reason for this is that any tax risk issues relating to that income would occur and need to be addressed at the trust or partnership level, and such entities are currently outside the ATO's scope for the RTP obligation. It would therefore be incongruous for a company to have the RTP obligation triggered by dint of distributions of income from a primary recipient that was itself outside the scope of RTP.
    3. Furthermore, failing to provide a lodgement exemption for a company whose sole source of income was discretionary trust distributions would lead to unnecessary administration for both the taxpayer company and the ATO, as such a company's RTP schedule would contain no meaningful disclosures in terms of the stated objectives of RTP.

    Further comments

    1. The RTP Schedule requires disclosure under Category A of certain tax return positions which are about as likely to be correct as incorrect. Such positions would come within the definition of "reasonably arguable" for the purpose of the Taxation Administration Act 1953. There is increased scope for confusion among taxpayers where the RTP Schedule requires further disclosure of a position that the taxpayer considers would be reasonably arguable under the law.
    2. Therefore it would be appropriate for the ATO to expand the RTP guidance materials to explain the rationale for the scope of the Category A disclosure requirement and to provide further relevant examples to assist private groups in understanding when a particular position could require disclosure.
      Last modified: 06 Dec 2019QC 60838