The Australian Taxation Office (ATO) has recognised this change and is also responding, with new powers/legislation, increased taxpayer reviews and audits with an international focus, and coordinated information sharing with other countries’ revenue authorities. In 2016/17 the ATO reported increased tax recoveries of $5.7bn from audit and reviews of public and multi-jurisdictional companies. Increasingly, the middle market is being impacted by this targeted ATO activity.
As a business with international dealings, what does this all mean? First, understand the potential areas for ATO focus and then take a proactive stance to your compliance affairs. When broken down and managed pro-actively it is possible for taxpayers to navigate through all the new rules. The key is to identify potential issues early. The below is a preliminary list of items that should flag situations where action is necessary.
Having identified the potential international tax risks, Pitcher Partners can assist you to work through the assessment of needs, and resulting documentation and policies that may need to be adopted.
Potential international tax risks
For the more evolved and larger corporate groups, the significant global entity‘s (SGEs) regime is another key evolution to be aware of. While the provisions are directed at multinational groups with >AU$1bn of consolidated annual income, this definition can capture Australian resident entities with minimal business operations and low turnover, if they are part of such a group. The additional obligations for these entities, further to the general provisions include:
The evolution of the ATO’s international focus should be heeded by all impacted small to medium enterprises (SMEs). The ATO’s recent win against Chevron in the Full Federal Court, was Australia’s largest transfer pricing case. The ATO successfully challenged the pricing on Chevron’s related party funding arrangement and has become re-energised in tackling profit shifting through financing arrangements. We are already seeing instances of this scenario trickle into the SME market.
Pitcher Partners can help clients in assessing potential risks and managing them through compliance action, analysis, documentation and if necessary, liaison with the ATO.