The Albanese Government continues to deliver on our commitment to increase tax transparency and ensure multinationals pay their fair share in tax. From next week, Australians will start to see how public companies structure their subsidiaries, including for tax purposes.
As part of the Australian Government’s focus on tax integrity and transparency, all public companies (that is, companies which are open to investment by the public) are now required to include a ‘consolidated entity disclosure statement’ in their annual financial reports.
This new requirement is effective for annual reporting periods beginning on or after 1 July 2023 and so will apply for the first time from 30 June 2024.
As a tax transparency measure, this new statement will hold companies to account, particularly large corporate groups, on their corporate structure and whether they are operating with opaque or atypical tax arrangements.
It does this by requiring public companies (listed and unlisted) to disclose all their subsidiaries, regardless of size or materiality.
The reporting and audit requirements for this new consolidated entity disclosure statement are purposefully intended to apply a higher standard than for the listing of material entities in a company’s financial statements (which will still apply for the other elements of the annual report in line with current accounting and auditing standards). Similarly, auditors are also expected to provide their views without regard to materiality.
This acknowledges that the consolidated entity disclosure statement is a separate part of a company’s financial report and is intended to shine a light on company structures, the number of subsidiaries and where they are located.
This statement will include information such as: the names of each entity; whether the entity was a body corporate, partnership or trust; if the entity is a body corporate, the public company’s percentage of ownership; and the tax residency of each of the entities.
As company reporting dates near, the Australian Securities and Investments Commission and the Auditing and Assurance Standards Board will consider if public guidance is required.
Entities will be able to determine tax residency in accordance with the Commissioner of Taxation’s existing public guidance. Entities that apply this guidance in good faith may declare that the tax residency status of a subsidiary is true and correct for the purposes of the new consolidated entity disclosure statement.
This measure builds on Labor’s strong track record of making Australia’s tax system fairer and more transparent.