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  • Expansion of the Reportable Tax Position Schedule to large private companies

    Consultation on this paper closed on 15 June 2020.

    For an overview of the feedback provided and the ATO response, email PrivateGroupsStewardshipGroup@ato.gov.au and specify what you require.

    Your feedback

    This document seeks your feedback on the proposed additional Category C questions for the Reportable Tax Position (RTP) Schedule. Large private companies who are notified at the start of the 2021 income tax year will be required to lodge an RTP Schedule with their 2021 Company Tax Return.

    Closing date for comment: 15 June 2020.

    Provide feedback by email to: Reportabletaxposition@ato.gov.au

    Contact officers:

    For large private company and business related queries please direct to Roman Raskine on (03) 9215 3221 or Michael Drogaris on (02) 9374 2323

    We encourage you to raise relevant issues or specific concerns about matters discussed in this paper. Your responses may be made available to the public on the ATO website unless you indicate that you would like all or part of your response to remain in confidence. Automatically generated confidentiality statements in emails do not suffice for this purpose. Confidential elements should be marked or provided in a separate document.

    Purpose

    The ATO seeks feedback on the proposed four additional Category C questions.

    Expansion to large private companies

    For income tax years starting on or after 1 July 2020 all large companies (regardless of whether they are public, foreign owned or private) will be required to lodge an RTP Schedule.

    Limited application in the 2021 income tax year

    For the 2021 income tax year, the ATO will notify selected large private companies (by the end of July 2020 if not earlier) that they are required to lodge the RTP Schedule. Large private companies who have not been notified will not have an obligation to lodge the RTP Schedule for the 2021 income tax year.

    The notification requirements will be determined based on the TBI in the last lodged tax return of the company and other entities in the economic group.

    For subsequent income tax years, it is intended that large private companies will be required to self-assess their lodgment requirement (this aligns with the current public and foreign owned companies RTP schedule instructions).

    Lodgment thresholds

    To ensure a level playing field in the large market, the ATO intends on retaining the same turnover thresholds and the economic group definition for public, foreign owned and private companies. The thresholds are set at a level where the taxpayer and their group are significant enough for the ATO to require transparency around their tax positions and they should have sufficient corporate tax governance to identify these positions with minimal additional compliance impost.

    From income tax years starting on or after 1 July 2020, RTP Schedules must be lodged by large private companies:

    • with a total business income (TBI) of $250 million or more, or
    • with TBI of $25 million or more and who are members of an economic group whose TBI is $250 million or more.

    Proposed changes to RTP Category C

    It is proposed to add new questions to the Category C section of the RTP schedule. The current RTP Category C questions will be reviewed for as part of the 2021/22 RTP consultation process. This is to ensure the ATO continues to review and minimise the cost of compliance for large private companies who are required to lodge the RTP schedule.

    Additional Category C questions

    Four additional Category C questions are proposed to be included in the RTP Schedule. These questions will be in addition to the current Category C questions that will also need to be considered by large private companies.

    The questions are:

    1. 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, external to the consolidated group and the loan was not repaid before your lodgment date for the current year of income and either of the subcategories below apply?  
      • Subcategory 1: The consolidated group member is a trust
      • Subcategory 2: The consolidated group member has a distributable surplus of nil.

    We are interested in loans made by members of consolidated groups to shareholders (or shareholders' associates) outside the consolidated group where those members do not have a distributable surplus as per Taxation Determination TD 2004/68.

    Enter the relevant subcategory number in the RTP Category C subcategory field. Enter the number 1 if both subcategories apply.

    1. Has your entity been part of an arrangement described by either subcategory below?  
      • 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/had an associate unit trust which, in the current or four prior 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 further guidance.

    Enter the relevant subcategory number in the RTP Category C subcategory field. Enter the number 2 if both subcategories apply.

    1. If your entity is a private company, and more than 10% of your issued shares is 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, and that change was either not in connection with a trust split, or your entity does not know whether there was a trust split.
      • Subcategory 2: There was a change of trustee during the year, and that change was in connection with a trust split.

    Refer to Taxation Determination TD 2019/14 (PDF 509KB)This link will download a file for further information.

    Where both subcategories apply to you, you need to select subcategory 2.

    1. 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 for further information.

    Consultation question

    Is the wording to the new RTP Category C questions clear and unambiguous? If not please suggest changes.

    Glossary

    The following key concepts are defined in the current RTP instructions. It is proposed that these same definitions will also apply to large private companies from 1 July 2020.

    Economic Group

    An economic group includes all entities (companies, trusts and partnerships, etc) that lodge an Australian tax return under a direct or indirect Australian or foreign ultimate holding company or other majority controlling interest.

    This includes all entities under a single ultimate holding company or under the ownership of a single individual, trust or partnership.

    Total Business Income

    Total business income is the amount reported at the 'total income' label of the company income tax return. For 2019, 'total income' is reported at label 6S.

    Total Business Income of an Economic Group

    The total business income of an economic group is the sum of all income labels in the Australian tax returns of every group member, including trusts and partnerships. There is no total income label on the trust and partnership tax returns, so this needs to be added up manually for all income labels.

    All Australian income of group members is included in the calculation. Foreign income of group members is only included where the entity generating that income is an Australian resident entity.

      Last modified: 25 May 2020QC 62716