Australian Transfer Pricing Alert:

Guidance on the provision of General Purpose Financial Statements

24 October 2017

ATO guidance on lodgement of GPFS

Significant global entities (multinational entities with annual global income exceeding $A1 billion as per their global financial statements) are now required to lodge general purpose financial statements (GPFS) to the Australian Taxation Office (ATO) with their tax return, unless the entity already lodged GPFS with the Australian Securities and Investments Commission (ASIC). This measure comes into effect for income years beginning on or after 1 July 2016. The ATO has issued its long awaited guidance on the matter on 28 September 2017.

Who will be impacted?

As expected, there is clarification that in some cases the accounts do not need to be prepared using Australian Accounting Standards, thus allowing some of the Australian subsidiaries of multinationals to submit global consolidated accounts instead. To qualify, global consolidated financial statements must be prepared in accordance with prescribed accounting standards [i.e., either under Australian Accounting Standards or other commercially accepted accounting principles (CAAP)].

Once received by the ATO they will be published and made publicly available on the ASIC register, which may affect some company’s decision as to whether to prepare stand-alone GPFS for an Australian subsidiary or to provide consolidated global GPFS. While GPFS do not need to be audited, the ATO considers it best practice to do so.

Penalties if GPFS not lodged with the ATO by the relevant date

For the purposes of transparency measures, GPFS is considered a taxation document and any failure to file on time or in the approved form may result in an administrative tax penalty. Such penalties in extreme cases can be as high as AUD 525,000 per document as outlined in previous Transfer Pricing Alerts, issued on 9 December 2015 and 6 May 2017.

It should be noted that requirements to provide GPFS will affect the same entities as other measures, including:

  • Country-by-country reporting requirements
  • Multi-National Anti-Avoidance law (“MAAL”)
  • Diverted Profits Tax Legislation (“DPT”)

BDO Comment

The October 2017 edition of the BDO Accounting News prepared by our International Financial Reporting Standards (IFRS) Advisory Services team contains an article that summarises the guidance provided by the ATO.