Australian subsidiaries of foreign owned multi-national companies need to convince their global head offices to comply with ATO

07 September 2016

According to global professional services firm BDO, Australian subsidiaries of foreign owned multi-national companies need to convince their global head offices to seek advice to comply with Australian Tax Office laws, in particular:

  • Country-by-Country (CbC) reporting which came into effect from 1 July 2016;
  • The multinational anti-avoidance law (MAAL) which came into effect from 1 January 2016;
  • The obligation to lodge general purpose financial statements with the ATO unless such statements have already been lodged with ASIC, for years commencing 1 July 2016 and later;
  • The proposed diverted profits tax from 1 July 2017;
  • The proposed 10,000% increase in administrative penalties for late lodgement of documents and the doubling of the shortfall penalties for false or misleading statements from 1 July 2017.

Tax Partner at BDO in Australia, Mark Molesworth, commented on ATO requirements for significant global entities and what this means for their local Australian subsidiary companies.

“Many local Australian businesses that might be part of a larger global conglomerate may be unaware that if their parent company overseas is deemed a significant global entity then a raft of new reporting is required by the ATO.  This is irrespective of the size of the Australian entity by itself – it could be quite small - but if its parent group meets the definition of a significant global entity, it will mean that the Australian entity has to ensure that it complies with the new requirements.

“The new rules are a broad suite of measures aimed at combating tax avoidance.

“Australian companies that are subsidiaries of foreign owned multi-nationals need to communicate to their overseas head office that they will need to comply with the rules and secure the support of their head office to do so. 

“A significant global entity is defined as a business entity with an annual global income of A$1 billion or more, or is a member of a group of accounting consolidated entities and the group’s global income is A$1 billion or more.”