New Australian Tax Reporting Law Opens Door to Fines, Scrutiny

A new Australian law will require an estimated 2,400 multinational groups—800 of which are US headquartered—to publish specific tax information on a country-by-country basis. It goes further than comparable systems and will provide new and very public challenges for multinationals with Australian operations.

Australia and the EU are moving ahead of other countries on public country-by-country reporting, and it will be interesting to see whether the new Trump administration takes any steps affecting other nations’ tax laws that would affect these requirements.

Disclosures will be required from years ending June 30, 2025, with a 12-month window, meaning the first publications will occur around June 30, 2026. In planning for the measure, multinationals will need to grapple with the specific information requiring disclosure, the narrow scope of exemptions, and the penalties for non-compliance.

The new public country-by-country system will apply in addition to the existing Australian confidential country-by-country reporting system, which has been in effect since 2016.

The reporting obligations generally apply to multinational groups which meet two annual tests—global income of A$1 billion ($629 million) and A$10 million of Australian-sourced income.

New Compliance Costs

The new reporting system will have initial compliance costs, as reporting groups familiarize themselves with the obligations. The overlap with the existing Australian confidential country-by-country reporting system will reduce this work to some degree, but certain nuances will require careful management.

Multinationals must now make a statement about their group’s approach to tax. Some groups already do this. However, it will be interesting to see how statements required under the public country-by-country system are prepared–particularly as the legislation specifically refers to the tax reporting standard of the Global Reporting Initiative, an international independent standards organization. This standard contains granular requirements covering tax strategy and even links with sustainability.

For each specified jurisdiction, the multinational group must perform and disclose a reconciliation between the income tax accrued and the headline statutory tax rate. No relief is provided for multinationals with only minor operations in a specified jurisdiction, meaning that any employee presence or income in a listed country will require disclosure and generate compliance costs.

The disclosures must be based on amounts in any audited consolidated financial statements. In contrast, confidential CbC reporting is more flexible, with the possibility of even internal management accounts being used.

Multinationals also must prepare for media scrutiny and will need communications planning to determine responses to stakeholder questions from the media, investors, and potentially non-tax regulators.

Exemptions and Penalties

Exemptions from the public country-by-country reporting obligations will be difficult to obtain and will be more stringent than the comparable EU public country-by-country reporting directive, with no option for groups to defer the disclosure of commercially sensitive information on a self-assessed basis.

The explanatory memorandum to the legislation only mentions three circumstances relevant to exemptions—disclosures impacting national security, breaching Australian or another country’s law, or resulting in substantial ramifications for an entity by revealing commercially sensitive information. It is expected that the Australian Tax Office will release further guidance on this in due course.

An administrative penalty will apply where a multinational misses the 12-month deadline for providing all required information to the Australian Tax Office for publication.

The late penalty is the same as for other Australian tax lodgments for multinationals—A$165,000 for filing a day late and increasing by that amount every 28 days up to a maximum of A$825,000.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Angela Wood is partner, Andy Bubb is special counsel, and Darcy Grace is a lawyer on Clayton Utz’s taxation disputes team.

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