Tax considerations for Australian businesses approaching $1 billion turnover

Exceeding this threshold can significantly increase an entity’s Australian tax compliance and reporting obligations, including enhanced administrative penalties and additional disclosure and lodgement requirements. This document summarises the key legislative requirements, thresholds and practical considerations relevant to entities that generate annual turnover of A$ 1 billion or more and outlines the resulting Australian tax implications.

Contents

Significant Global Entities (SGE)

Country by Country Reporting Entity (CbCRE)

Public CbCR

SGE, CbC reporting entity and Public CbC: the differences

Pillar Two

Timeline example: first generating A$1 billion or more in the year end 30 June 2026

Significant Global Entities (SGE)

Key implications once rules apply

No additional forms are required to be lodged with the ATO. It is simply a disclosure on the taxpayer’s income tax return. Although, where an SGE is also a Country-by-Country Reporting Entity (CbCRE) (discussed in the next section) then additional reporting obligations apply. 

However, there are various measures applicable to SGEs, including:

• significant Failure To Lodge (FTL) penalties on ‘approved forms’ (effectively all tax lodgements);
• the proposed loss carry-back rules will not apply to SGEs;
• Multinational Anti-Avoidance Law; and
• Diverted Profits Tax.

The current FTL penalties are set out below: 

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Country by Country Reporting Entity

Key implications once rules apply 

A CbC reporting package will need to be lodged with the ATO. This comprises the following: 

• Local File;
• Master File; and
• CbC Report. 

The Local File is focused on the Australian entity and its related party dealings. The CbC Report presents aggregated data by jurisdiction while the Master File provides clearer context on value creation across the group. Together, these documents provide the ATO a comprehensive view of the group's global operations and identify potential transfer pricing risks. 

The lodgement due date is 12 months after the applicable year end, however, where the local file is lodged when the applicable tax return is due, an exemption applies for completing Part A of the International Dealings Schedule (part of the Income Tax Return form). 

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Public CbCR

Key implications 

A Public CbCR will need to be prepared and lodged with the ATO in the approved form for publication. 

Broadly, the report requires taxpayers to publicly disclose certain tax and financial information for Australia and 'specified jurisdictions' such as Hong Kong, Singapore and Switzerland on a standalone basis. Information for other jurisdictions may be aggregated as 'Rest of World'.

The disclosures include:

• a description of the group's approach to tax;
• a list of constituent entities and their tax jurisdictions;
• description of main business activities;
• revenue from unrelated and related parties;
• profit or loss before income tax;
• income tax paid and income tax accrued;
• difference between effective and statutory tax rates;
• number of employees; and
• book value of tangible assets.

Unlike traditional CbC reporting which is lodged confidentially with tax authorities, Public CbCR information will be made publicly available. The regime is intended to increase transparency regarding the global allocation of income, activities and taxes paid by large multinational groups.

The lodgement due date is 12 months after the applicable year end.

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SGE, CbCRE and Public CbCR: the differences

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Pillar Two

Key implications once rules apply 

Additional reporting and compliance obligations apply for multinational groups, with the intent of highlighting the effective tax rate of each jurisdiction a multinational group operates in. 

Where an effective tax rate is less than 15 per cent, then a ‘top‑up tax’ is required to be paid by a group member. 

Even where no top‑up tax arises, various lodgements may still be required, including:

• Global Anti-Base Erosion Information Return (GIR): Provides informational on each entity in the group. This is only required where an Australian entity is the Ultimate Parent Entity; or
• Foreign lodgement notification (FLN): where the GIR is lodged offshore; and
• Australian Income Inclusion Rule/Undertaxed Profits Rule Tax Return (Australian IIR/UTPR Tax Return): required even if top-up tax is nil.
• Australian Domestic Minimum Tax Return (Australian DMT Tax Return): required even if the top-up tax is nil.

One form now combines the FLN, Australian IIR/UTPR Tax Return and Australian DMT Tax Return. Relevant sections must be completed even where the resulting liability is nil.​

Transitional safe harbour provisions may reduce compliance obligations, particularly in the early years of the regime.

Lodgement due date

All forms are required to be lodged within the following timeframes:

• First fiscal year: 18 months after the year-end.
• Subsequent years: 15 months after the year-end.

Therefore, examples of the first-year lodgement due dates based on year-end are set out below.

Whilst the Commissioner has discretion to extend the lodgement date for domestic tax returns, there is no statutory discretion to extend the due date for the GIR or FLN. 

Note, if the GIR is being lodged in a foreign jurisdiction and is lodged late, the ATO may require you to lodge the GIR in Australia and FTL penalties may apply. 

However, in accordance with OECD guidance, the ATO will not impose FTL penalties during the Transition Period (i.e. 31 December 2026 – 30 June 2028) if entities have taken ‘reasonable measures’ to correctly apply the GLoBE rules. The ATO have said that they will adopt a ‘soft landing approach’ to penalty enforcement where the MNE Group can demonstrate it has acted in good faith and made genuine efforts to understand and comply with the lodgement obligations.  

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Timeline example: first generating A$1 billion or more in the year ended 30 June 2026

^{Assumption: the group first satisfies the A$1bn annual global income threshold in the year ended 30 June 2026. Pillar Two is shown separately because its €750m test must be met in at least two of the four preceding fiscal years.}

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Article contributed to by Josie Cransberg – Corporate Tax