In brief
New developments are ongoing in relation to the application of country by country (CBC) reporting obligations in Australia. Specifically, the Australian Taxation Office (ATO) has provided further updates on its proposed approach for the short form local file.
In detail
Update on proposed changes to the short form local file
As noted in our Tax Alert of 9 October 2024, the ATO has proposed significant changes to the short form local file for CBC reporting obligations for periods starting on or after 1 January 2024. This included, among other things:
- Transitioning to a message structure table (MST) from the current free text format
- Increased disclosures in relation to effective reporting lines from Australian employees to overseas personnel; and
- Additional disclosures in relation to significant business restructures.
On 14 October 2024, and following written submissions, the ATO has decided to change the current draft version of the MST for the short form local file. The following disclosures in relation to effective reporting lines for Australian employees will no longer be mandatory:
- The full names of the Australian individuals who effectively reported to overseas personnel.
- The full names of the overseas personnel to whom the Australian employees effectively reported.
- The countries of residence of the overseas personnel to whom the Australian employee reported.
These changes resulted from comments raised by stakeholders on a range of issues during the consultation process.
The ATO is continuing to consider feedback on the proposed short form. One key area raised has been in relation to what is not considered a ‘significant’ restructure with a request for examples to assist taxpayers to understand how to determine if a restructure or arrangement is significant or not.
There are expected to be changes to the Short Form instructions as a result of this ongoing consultation.
The takeaway
These changes to the proposed short form demonstrate a willingness on the part of the ATO to listen to stakeholders and make changes to the initial proposals. However, while these changes will lessen the burden for the collection of personal data, there is still significant work required to get ready for the proposed short form and CBC reporting entities should consider these proposed new requirements now.
Nick Houseman
Hamish McElwee
Georgie Hockings
Greg Weickhardt
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