Multinational entities subject to the Public country-by-country (CBC) reporting regime must publish selected tax information [1] for Australia, specified countries and the remainder of their global operations. [2]
Reporting obligations apply to Public CBC entities for reporting periods commencing on or after 1 July 2024, unless they have been granted an exemption.
This draft Practice Statement [3] provides you with context about the obligations imposed by the Public CBC reporting regime and guidance about the authority that the law provides to the Commissioner to exempt an entity from those obligations under subsections 3DB(5) or (6) of the Taxation Administration Act 1953 (TAA). [4]
The Public CBC reporting regime is separate from and additional to the reporting requirements imposed by Subdivision 815-E of the Income Tax Assessment Act 1997 (ITAA 1997), which is sometimes called private or confidential CBC, that applies to income years starting on or after 1 January 2016.
All legislative references in this Practice Statement are to the TAA, unless otherwise indicated.
This Practice Statement outlines: • considerations relevant to the exercise of the discretion • the process for seeking an exemption from Public CBC reporting obligations • the information that applicants should provide with the application for exemption.
As decision-maker for an exemption application, you must follow the principles and guidance outlined in this Practice Statement [5] when exercising the Commissioner's discretion under subsections 3DB(5) or (6). However, this Practice Statement does not direct or restrict the discretion to exempt; each case must be decided on its facts and circumstances.
This Practice Statement does not apply to the exclusion from Public CBC reporting for government-related entities. [6]
This Practice Statement does not apply to the exemption provided in the law for classes of entities to be exempted by regulation or specified in a legislative instrument. [7] While the principles in this Practice Statement may be relevant and informative to the Commissioner in considering whether to exempt a class of entities by legislative instrument, that is a separate exercise of authority. [8]
The Public CBC reporting regime applies to an entity (reporting entity) if: • it is a constitutional corporation, a partnership (in which each partner is a constitutional corporation) or a trust (of which each trustee is a constitutional corporation) [9] • it is a member of a CBC reporting group at any time during the reporting period [10] (that is, a group which is consolidated for accounting purposes as a single group or is a notional listed company group) [11] , and • during the previous reporting period, it was a 'CBC reporting parent' [12] (an entity with annual global income for the period of A$1 billion or more, which was not controlled by another group member).
If a subsidiary of a global group is not included in their global parent entity's consolidated financial statements, they may not meet the membership requirement [13] of that group and therefore not be within that group's Public CBC reporting obligations. However, that entity may still be subject to the Public CBC reporting regime if it qualifies separately (that is, it has sufficient annual global income and meets the other requirements).
A reporting entity has Public CBC reporting obligations for a period if the following requirements are met in that period: • they, or a member of their CBC reporting group, are an Australian resident or a foreign resident operating an Australian permanent establishment [14] • their aggregated turnover [15] for the reporting period includes Australian-sourced income of $10 million or more [16] , and • they do not have a full exemption. [17]
If they meet all of the requirements outlined in paragraph 12 of this Practice Statement, reporting entities are required to publish under the Public CBC regime, even if they do not have foreign operations. [18]
Entities publish by giving their Public CBC report to us in the approved form within 12 months after the end of the reporting period and we facilitate publication on an Australian government website. [19]
Australia's Public CBC reporting regime is designed to enhance multinational tax transparency by improving the quality of information disclosed by multinationals in and about the jurisdictions in which they operate. This information – when consolidated and reported in a consistent, standardised way – better indicates the scale of activity of an entity in a country, and its commensurate tax contribution. [20]
Australia's Public CBC regime builds on the Global Reporting Initiative's Tax Standard (GRI-207: Tax 2019) [21] , which was informed by the confidential Organisation for Economic Co-operation and Development (OECD) CBC reporting model [22] , to establish 'one of the world's most comprehensive' Public CBC regimes. [23] It does this by requiring 'enhanced reporting granularity to provide greater insights into the operational structure of an entity'. [24]
Better corporate tax transparency helps address inconsistencies and difficulties in interpreting and comparing tax disclosures. This information improves the public debate on the appropriateness of current taxation settings by providing the community with a better understanding of an entity's operations and how much tax multinationals pay relative to their activities. [25]
Such public reporting enables investors and capital providers (for example, shareholders) to assess risk and inform their investment strategies, based on accurate information gathered from the public disclosures. [26]
The law gives the Commissioner the power to exempt an entity from some, or all, of its Public CBC reporting obligations for one reporting period at a time. The ability to give a Public CBC reporting exemption is discretionary. [27] The law provides the 'exemption powers to respond to exceptional circumstances where disclosure of information ... would be inappropriate'. [28]
The law provides discretion for the Commissioner to exempt an entity from publishing information or from publishing information 'of a particular kin d'. The existence of both options in the Public CBC law supports the policy intent that an entity should comply with the reporting requirements to the greatest extent possible. [29]
For present purposes, 'full exemption' refers to an entity being released from all publishing obligations for a single reporting period.
'Partial exemption' refers to a release from some of the reporting obligations of an entity for a single reporting period – for example, one or more but not all of the pieces of information that are otherwise required to be published, or all information, but for only particular jurisdiction or jurisdictions.
Where an applicant has applied for an exemption, you must consider the information in support of the application and decide whether to give a full, partial or no exemption. Where an applicant has applied for a full exemption, you may decide to give only a partial exemption instead.
When you grant a partial exemption, you must decide which particular kinds of information to exempt. See Appendix 3 to the Practice Statement for the list of information required to be disclosed.
If the information provided by the applicant does not support the exemption and further information is required on matters relevant to the exemption request, you should give the applicant the opportunity to provide that information before making your decision.
As the law does not provide for us to re-make a decision for a reporting period [30] , engaging with the applicant before an unfavourable decision is made is important as they may decide to withdraw their request before we make a decision.
A discretionary decision requires the consideration of various factors and combinations of factors. If the factors to be considered by a decision-maker are not specified in law, they must be determined by implication from the subject matter, scope and purpose of the law. [31]
The vesting of a discretion in an official does not give that official authority to ignore policy in the exercise of that discretion. [32] Policy is a relevant consideration. [33] It guides [34] administrative decision-making. As the decision-maker, it is proper that you consider the policy of the law.
In exercising the Commissioner's discretion to grant an exemption, the purpose of the public disclosure regime should be considered; being to enhance tax transparency [35] to help the public better assess an entity's economic presence in a jurisdiction and how this aligns with the entity's tax position in that jurisdiction. [36] The result of granting exemptions should not undermine the transparency and accountability aims of this disclosure regime, the integrity of the tax system, nor the public's trust in the Commissioner's administration and stewardship of the system.
During the law design process, extensive consultation was conducted on the proposed Public CBC regime (including 2 Treasury consultations [37] and a Senate Committee Inquiry [38] ). Issues raised in submissions to each were considered and some changes were made to earlier proposals. It is noted that certain aspects of the Public CBC regime design were not changed. Importantly, private groups were not excluded from this public transparency regime, a carve-out for commercially sensitive information was not legislated, nor was any exemption by self-assessment. These design choices indicate that the parliamentary pursuit of transparency outweighed broad commercial sensitivity concerns and that the government intended businesses to engage with us to have their specific circumstances considered.
Similarly, submissions calling for reducing the compliance burden by, for example, adopting the European Union regime or increasing certainty for entities by allowing for exemption periods longer than one year were considered. Some revisions [39] were made – for example, the initial policy setting was to require disaggregated CBC disclosures for all jurisdictions, but this was changed to allow aggregated reporting for jurisdictions other than Australia and the specified countries. Where differences remain, that is by design.
Granting an exemption will result in an entity not being required to publicly disclose some, or all, of the information specifically listed in the law, in the consistent format that the Public CBC regime enables (for a particular reporting period).
In considering an application, you should consider whether granting an exemption is consistent with the objectives of the Public CBC reporting regime – that is, whether there are circumstances (exceptional circumstances) that warrant the information not being published, even though the purpose of the regime is to deliver a meaningful enhancement to corporate tax transparency.
An administrative discretion of this kind is not limited, except by the subject matter, scope and purpose of the law, and its exercise should not be approached with preconceptions. However, the mandatory language, specificity and granularity of the reporting obligations imposed by the law indicate that the discretion is not to be exercised lightly. This is supported by observations in the EM that the power exists to enable the Commissioner to respond to 'exceptional circumstances' [40] , that the exemption powers are expected to be exercised in 'limited circumstances' [41] and the nature of the examples in paragraph 4.23 of the EM.
There must be something unusual or different to take the subject of the exemption out of the ordinary course. This may be particular harm or consequences caused by public disclosure (to the applicant or another party), which is disproportionate to the transparency intent (and not already considered by parliament).
The circumstances need not be unique or unprecedented or very rare, but cannot be circumstances that are regularly, routinely or normally encountered, nor will it suffice just to show that circumstances are out of the ordinary course. Rather, what is unusual must exhibit something that takes it outside the circumstances in which disclosure is expected. For example, an assertion that complying with the reporting obligations is too onerous or costly is not likely to be a circumstance sufficient to justify an exemption.
A reporting entity may seek a reporting exemption on any ground, which you will consider holistically based on the facts and circumstances set out in their application. Examples of the kind of matters that would be appropriate to consider, given in the EM, are: • impact on national security • breach of Australian law • breaching the laws of another jurisdiction, or • revealing commercially sensitive information.
The existence of these matters does not automatically entitle any entity to an exemption and the absence of them does not preclude the discretion being exercised. You must give primary effect to the statutory language, read in context, in considering exercising the discretion. [42]
A relevant factor in this consideration may include whether the information would be aggregated with other information and effectively disguised.
If the information is already in the public domain (or will be), can be readily obtained by the public (for example, by payment of an access fee) or could be deduced from such information, it is unlikely to warrant an exemption. This would include: • financial reports • stock exchange disclosures • court or litigation documents • Hansard • leaked information • freedom of information disclosures or disclosures in other jurisdictions • submissions to parliamentary committees • information in the Corporate Tax Transparency Report • information available on government websites, such as AusTender or data.gov.au, or published research and development expenditure information.
A factor in favour of granting a reporting exemption is if disclosure of the information would impact national security.
Australian law defines 'national security' as Australia's defence, security, international relations or law enforcement interests. [43] For the purposes of the Public CBC reporting regime, the national security of other jurisdictions may also be a relevant consideration.
Security is the [44] : • protection of the Commonwealth and states and territories, and the people of, from espionage, sabotage, politically motivated violence, promotion of communal violence, attacks on Australia's defence system or acts of foreign interference • protection of Australia's territorial and border integrity from serious threats, and • carrying out of Australia's responsibilities to any foreign country in relation to any of the aforementioned matters.
International relations are the political, military and economic relations with foreign governments and international organisations. [45]
Law enforcement includes interests in [46] : • avoiding disruption to national and international efforts relating to law enforcement, criminal intelligence and security intelligence • protecting the technologies and methods used to collect, analyse, secure or otherwise deal with, criminal intelligence, foreign intelligence or security intelligence • the protection and safety of informants and of persons associated with informants • ensuring that intelligence and law enforcement agencies are not discouraged from giving information to a nation's government and government agencies.
The following types of information, for example, are matters which we would not expect to be publicly disclosed due to national security: • information that could reveal where secret defence, intelligence, security or law enforcement-related assets are placed around the world (by Australia, countries we are allied with or have cooperative relationships with) • information that could reveal where defence, intelligence, security or law enforcement personnel or contractors have been placed, if that placement is secret or ongoing, as it may put them in danger • information exposing contracts with Australian defence, intelligence, security or law enforcement agencies which the Australian government has imposed strict secrecy requirements upon, has not publicly acknowledged and will not be sufficiently disguised by aggregation in the Public CBC report.
The fact that a CBC reporting group operates in or with the defence, intelligence, security or law enforcement industries or sectors is not likely sufficient, on its own, to warrant an exemption. Much information about those entities may be publicly available anyway – particularly via their financial statements and contract notices on government websites such as the AusTender website.
Contracts between these businesses and the government are not always related to national security. Public (AusTender) information shows a wide variety of contracts, from the likely non-sensitive (air conditioners and office equipment) through to arms and ammunition, weapons, explosives, vehicles and surveillance and detection equipment. Where a reporting group has a significant proportion of commercial activities or activities which are not related to national security, the sensitive information may be effectively disguised among the rest, therefore a reporting exemption is less likely to be warranted.
The Public CBC reporting of the specified jurisdictions may particularly expose information such as that outlined in paragraph 46 of this Practice Statement because it is reported on a stand-alone disaggregated basis.
The applicant should explain whether the impact on national security comes from all the obligations imposed by Public CBC reporting or from particular pieces of information being reported, and how that being reported would adversely impact national security.
A factor in favour of granting a reporting exemption is if public disclosure of the information breaches an Australian law. The exemption application must specify the relevant law and the particular reporting obligation and explain how the disclosure of that information breaches that law.
If public disclosure of the information conflicts with a law of a state or territory, the disclosure requirements of the TAA will prevail. However, the reasons for prohibition of disclosure under those laws should be taken into account in considering an exemption.
If a conflict appears between the TAA and another law of the Commonwealth, the matter should not be progressed before seeking advice as to which law prevails.
A factor in favour of granting a reporting exemption is if public disclosure of the information breaches the law of another jurisdiction.
However, you must take into account whether the design of that foreign law may have been to frustrate the operation of Australia's Public CBC reporting regime. Such a purpose would detract from whether exceptional circumstances genuinely exist to deviate from parliament's intention to enhance multinational transparency.
If another jurisdiction has given an entity an exemption from their Public CBC regime (in that other jurisdiction), that does not necessarily mean that we will or should also grant that CBC reporting entity an exemption on that basis alone.
The exemption application must specify the law and explain whether it impacts all of their reporting obligations or which particular kinds of information. A general reference to non-disclosure law for a subject matter, for example, will unlikely be sufficient to justify a reporting exemption.
A factor in favour of granting a reporting exemption is if the information is commercially sensitive and public disclosure of the information would result in severe consequences (by an objective standard) for the entity.
Commercially sensitive information is information which would undermine or disadvantage a business or entity if shared. Factors indicating that information is commercially sensitive include: • the nature of the information • the value or cost for its development • whether the information's value would be diminished or destroyed by disclosure • its importance to the business • measures taken to keep the information secret.
You are not required to investigate these indicators; the onus is on the applicant to provide their reasons and evidence. Expert or specialist advice is not required to be sought (by us or the applicant). These indicators are provided for your guidance when considering the material the applicant has provided.
We appreciate that information which is novel or particular, especially about operations, product process or strategy of the business, is commercially sensitive. However, the relevant question is whether the information which the Public CBC regime requires to be disclosed is commercially sensitive. For example, is the business's number of employees in Australia or in a specified jurisdiction commercially sensitive? See Appendix 3 to this Practice Statement for the information required to be disclosed.
It may be a relevant consideration if a compilation of information (in the Public CBC report or combined with other information) has commercial value or significance, independent of the individual data points. A general assertion that Public CBC disclosures will enable competitors to reverse-engineer decisions or insights into the business will not likely be sufficient, whereas an explanation of how particular pieces of information could be used against the business will be more compelling.
Noting the policy rationale and law design choices that were made (see paragraphs 30 and 31 of this Practice Statement), the disclosure of the information must rise beyond the level of harm already contemplated by parliament in implementing the reporting regime. That is, the fact that a reporting entity or group is privately held, or does not have any other public reporting obligations, will not be sufficient.
It is a relevant consideration that Public CBC reports are published retrospectively. That is, the information in the report is about a period that has ended up to a year before the report is lodged. This will likely impact the sensitivity and value of the information in the report and reduce the consequences of it being made public. Forward-looking or general statements about revealing insights into planned actions or undermining opportunities will not likely be sufficient, whereas an explanation of how particular information from a year prior could be used against the business will be more compelling.
Detriment being real or actual weighs in favour of a reporting exemption; remote or hypothetical detriment weighs against a reporting exemption. A measurable or quantifiable detriment that is commercially significant will carry more weight. A detriment that is trivial or commercially insignificant, even where measurable, will unlikely be sufficient to justify a reporting exemption.
The exemption application must explain the adverse impacts and whether it relates to all of their Public CBC reporting obligations or which particular kinds of information in the report.
It is unlikely that exceptional circumstances will be established based on a claim there is potential for detriment based on a reader misinterpreting or misunderstanding information in a Public CBC report. If CBC reporting entities wish to contextualise their information, they may do so outside of the Public CBC report, such as on their website or in their annual report.
Australia's Public CBC regime adopts the A$1 billion annual global income threshold [47] enacted as a near equivalent [48] amount, as at January 2015, to the OECD/G20 BEPS Project CBC reporting annual global income threshold which was EUR750 million. [49]
We will give positive weight to an exemption request where an entity, subject to a public CBC regime in their 'home' jurisdiction, is brought within the Australian regime merely due to fluctuations in foreign currencies and does not satisfy the revenue reporting threshold in any other public CBC regime globally for the reporting period. That is, if the applicant's income is below the revenue reporting threshold in the parent entity's jurisdiction and, accordingly, is not within scope of their 'home' public CBC regime in that reporting period, but by virtue of exchange rate fluctuation they are within Australia's regime that period.
This consideration has regard for the point-in-time international agreement about the size of entities that should be subject to increased tax transparency obligations. [50]
Entities are encouraged to register with us for Public CBC reporting prior to lodging an application for an exemption. Registration improves administrative efficiency; it does not change the obligations imposed by the law on Public CBC reporting entities.
Entities seeking an exemption from Public CBC reporting (applicants) should apply by submitting a written request to us with supporting information. Instructions for applying for an exemption will be provided on ato.gov.au .
The application must include an explanation for the reporting exemption. The onus is on the entity to justify why it should be granted an exemption. The application should be supported by relevant documents, legislative and legal references and, where applicable, an analysis of the potential adverse impacts that public disclosure of the information would have. There must be a logical connection between the information provided and the exemption requested.
Applications will be considered on a case-by-case basis, based on the information provided.
Only one application for exemption from an entity will be decided for each reporting period. In considering an exemption application, consider whether: • the application contains sufficient information and is supported by sufficient evidence • further information is required, and • there are any anomalies or errors that require addressing.
As per paragraphs 25 and 26 of this Practice Statement, prior to an application being declined, you must endeavour to contact the applicant and give them an opportunity to correct any such shortcomings.
See Appendix 2 to this Practice Statement for examples of the types of evidence required.
The confidentiality of information provided to us in support of an exemption request is protected by statute. [51]
Entities may apply for an exemption before the reporting period ends. We recommend that applicants consider their circumstances and supporting evidence available to them, to decide when is appropriate for them to apply. Some applicants will be in a position to provide reasons and evidence based on what actually occurred during the relevant reporting period only after the period has ended.
As per paragraph 26 of this Practice Statement, once an exemption application has been decided for a reporting period, that period cannot be reconsidered. [52]
Until an entity is notified that a full or partial exemption has been granted, the reporting obligations imposed by the law remain in effect. If notification of the exemption decision is not received by the statutory due date for publishing, applicants should discuss with us an extension of time to report. [53] Each request for an extension of time will be assessed on its merits. It will be viewed favourably if the entity has lodged their exemption application with reasonable time for consideration before the due date and is actively engaging with us (in resolving that application and in responding to queries and requests for further information promptly).
The Commissioner's discretion to give exemptions to applicants applies for one reporting period at a time. [54]
If an entity has been exempted from their reporting obligations, or part of, in a prior year and they want the same exemption again, they must apply for that later exemption.
In making an application for a subsequent period: • Where there are changes from the previous reporting period to some or all of the information previously provided – the entity should provide the relevant updated reasoning and information for the reporting period for which they are seeking the exemption. This includes providing affected documents, such as agreements or contracts and updated financial statements. • Where there are no changes from the previous reporting period – the entity may choose to provide a written statement advising there has been no change from the previous reporting period and supporting updated financial reports (where relevant to their exemption), and request that we consider their exemption request on the same reasoning and pre-provided evidence. We will consider this type of request for up to 2 reporting periods after the first exemption is given.
If the circumstances that justified a prior exemption no longer exist (for example, the circumstances were temporary), the prior rationale would no longer apply.
If you are concerned about the continuing accuracy and applicability of the reasons and evidence, including on the basis of the passage of time since they were originally provided, you may give less weight to the information in deciding the discretion. You should engage with the applicant and allow an opportunity to supply updated information before you make an unfavourable decision.
Subsequent period applications are assessed with the same rigor as the initial application. You do not have to follow a decision from a previous year. The discretion requires the decision-maker to take into account the facts and circumstances relevant to the period, which may have changed from prior periods.
You will notify the applicant in writing either of the decision to grant an exemption, to partially grant an exemption or not to grant an exemption. [55]
Reasons for the decision must be provided for cases where the exemption granted covers only part of the application or no exemption is granted. [56]
A CBC reporting entity is liable to an administrative penalty if the entity is required to publish information and fails to do so on time. [57]
A CBC reporting entity is liable to an administrative penalty if the entity is required to publish information to correct a material error and fails to do so on time. [58]
The administrative penalty for failing to publish or failing to correct information is 500 penalty units [59] for each period of 28 days, up to a maxium of 2,500 penalty units. [60] At the current value of a penalty unit, the minimum penalty is $165,000 and the maximum is $825,000 (per failure).
These penalties only become payable after we give the entity notice of its liability to pay the penalty and reasons why the entity is liable. [61]
A person who refuses or fails to publish information as required by the tax law commits a civil offence. [62]
A Public CBC reporting exemption decision is not a 'reviewable objection decision'. [63] This means entities do not have the right to lodge an objection with us or, subsequently, have the exemption decision reviewed by the Administrative Review Tribunal.
If an entity is not satisfied with the exemption decision, they may appeal to the Federal Court of Australia for a review of administrative decision under the Administrative Decisions (Judicial Review) Act 1977 or section 39B of the Judiciary Act 1903 .
A judicial review of an administrative decision of this kind involves the court reviewing whether the process by which the decision was made was flawed or whether the decision involves an error of law. The court cannot remake the decision but may remit the decision back to us to remake according to law. [64]
When finalised, this Practice Statement will apply from the date of publication.