On 12 February 2020, the Australian Government introduced into Parliament a Bill to broaden the significant global entity (SGE) definition after the May 2018 budget announcement. Treasury Laws Amendment (2020 Measures No. 1) Bill 2020 (Treasury link here) follows an earlier Bill which lapsed with the calling of the 2019 Federal Election and updated November 2019 exposure draft (ED) law.
Expansion of the SGE definition will impact:
Importantly, the Bill introduces slightly different rules for CbCR and GPFS with a new definition of a “country by country reporting entity”: the SGE definition continues to apply for other purposes.
As a result, the proposals require review and assessment by entities that may not currently meet the SGE definition due to various exclusions from accounting consolidation, including notably those groups headed by individuals, partnerships, trusts, private companies and investment entities.
An entity will be an SGE generally if it is either:
The Bill expands the SGE definition to groups of entities headed by an entity other than a listed company in the same way as it applies to groups headed by a listed company (notional listed company group). The criteria will apply despite exceptions to the rules setting out when a group of entities must consolidate for accounting purposes, including materiality rules, in the applicable accounting rules. If there are no or inadequate consolidated global financial statements for the notional listed company group, the annual global income is the amount determined on the assumption that such statements had been prepared.
To better align the CbCR reporting rules with international standards, the Bill also adjusts the CbCR obligations to apply only to a “country-by-country reporting entity” (CbCRE). Most significant global entity groups that are a notional listed company group will also be CbCREs. However, some exceptions apply. The requirement for certain corporate tax entities to provide GPFSs to the Commissioner will also now apply to CbCREs rather than all SGEs.
The potential impact of these changes will require review and assessment in each case, in conjunction with accounting professionals, and various other technical changes will need to be considered.
For additional information with respect to this Alert, please contact the following: