Accounting principles
Accounting principles has the meaning given by subsection 995–1(1).
Financial statements
Financial statements are the documents that represent the financial position and financial performance of an entity, prepared in accordance with accounting principles. They include:
- financial reports prepared pursuant to Chapter 2M of the Corporations Act 2001
- statements (however described) that cover the activities of the Australian operations, where the taxpayer is a foreign resident operating through a permanent establishment in Australia
- reports prepared for submission to the Australian Prudential Regulation Authority (APRA) that cover the activities of the Australian operations, where the taxpayer is a foreign bank with an Australian permanent establishment.
If there are one or more sets of financial statements relevant for an entity, the financial statements that apply are those that recognise or disclose the uncertainty about taxes payable or recoverable to which the position relates.
For guidance on what is considered a financial statement see Guidance on providing general purpose financial statements.
Hybrid mismatch rules
Hybrid mismatch rules collectively refer to Division 832 and amendments to:
- Subdivision 768–A
- section 23AH of the Income Tax Assessment Act 1936 (ITAA 1936)
- Part IIIB of the ITAA 1936.
Loan amount
For loans or borrowings, trade financing and other types of debt interests under Division 974 of the ITAA 1997, the average balance of the loan, borrowing or other debt interest during the income year is calculated the same way as quarterly balances of borrowings and loans shown at Question 11a of the International dealings schedule 2026.
Majority controlling interest
An entity holds a majority controlling interest in another entity where it holds more than 50% of the voting power at a general meeting of that entity.
Materiality amount
An entity's materiality amount is 5% of its Australian current tax expense, except where:
- 5% of its Australian current tax expense exceeds A$30 million – the materiality amount is then A$30 million
- 5% of its Australian current tax expense is less than A$3 million – the materiality amount is then A$3 million
- it has no Australian current tax expense – the materiality amount is then A$3 million.
You must calculate your entity's Australian current tax expense in accordance with accounting principles. If your entity is the head company of a MEC group, Australian current tax expense is the aggregate of the current tax expense of all members of the MEC group.
Use A$3 million as the materiality amount if:
- your entity doesn't calculate its Australian current tax expense and doing so requires significant additional effort
- you consider the materiality amount for RTP purposes isn't appropriate to your entity's circumstances.
International related parties
International related parties are persons:
- who are not dealing wholly independently with one another in their commercial or financial relations
- whose dealings or relations can be subject to Subdivision 815–B of the ITAA 1997 or the associated enterprises article of a relevant double tax agreement (DTA).
The term includes any overseas entity or person who meets any of the following scenarios:
- The overseas entity or person participates directly or indirectly in your entity's management, control or capital.
- Your entity participates directly or indirectly in the management, control or capital of the overseas entity or person.
- The overseas entity or person has the same entity or person participating directly or indirectly in its management, control or capital as your entity.
Position
A position is the effect, for taxation purposes, given to particular arrangements or transactions, as reflected in the statements made in your entity's relevant 2026 tax return.
This includes positions:
- due to interpretative matters – for example, legislative construction
- due to findings of fact – for example, market valuations
- where the effect for tax purposes is an omission from your entity's tax return.
Potential adjustment
Potential adjustment means the total of the following amounts in the 2025–26 income year should the RTP not be sustained:
- your entity's tax rate multiplied by an amount, or part of an amount, that would be included in its assessable income
- your entity's tax rate multiplied by a deduction, or a part of a deduction, that wouldn't be allowable to your entity
- your entity's tax rate multiplied by a capital loss, or a part of that capital loss, that wouldn't be incurred by your entity
- a foreign income tax offset that wouldn't be allowable to your entity
- a tax offset that wouldn't be allowable to your entity.
Your entity's tax rate is the applicable tax rate specified in the Income Tax Rates Act 1986.
Total business income
For entities that are collective investment vehicles– including a managed investment trust, attribution managed investment trust, or attribution or non-attribution corporate collective investment vehicle sub-fund trust– we use modified total business income (TBI) that consists of gross income including gross capital gains. For the 2025–26 income year the threshold for lodgement is $250 million. For more information, see Examples: total business income (TBI).
Continue to: Section A: Taxpayer details – CIVs
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