ATO announces significant changes to local file requirements

The SFLF is now required to be prepared in the standardised message structure table (MST) format. This means that any missing information will create validation errors and require completion prior to lodgement.

CbCREs are required to identify the number of main business lines or functions within the local Australian operations. In addition, CbCREs will need to: 

• describe each business line or function,
• delineate the strategies employed for each business line or function,
• discuss whether any of the business lines or functions overlap, and
• identify key competitors for each business line or function. 

CbCREs are required to confirm whether there are any personnel employed within the Australian operations that have accountability to report to overseas personnel. Where the response is ‘yes’, CbCREs will need to: 

• provide the job title of these local personnel, and Australian Business Number/Tax File Number of the employing entity,
• confirm the number of overseas personnel to whom the local person reports to,
• provide the job title, principal office location, and employing entity details for the overseas personnel,
• describe the functions or activities for which reporting occurs, and
• provide relevant dates, if the overseas reporting commenced or ceased during the income year.  

The above will need to be answered for each local individual with an overseas reporting line, and an organisational structure diagram is also required. 

A CbCRE is required to annually assess whether it has had any: 

• restructures, or
• any new arrangements involving the licence, transfer, or creation of intangibles. 

The definition for what constitutes a ‘restructure’ has been broadened and is no longer contained to that affecting the local business. Transactions occurring between overseas members of the group related to a restructure may also now require disclosure under the updates, despite the Australian taxpayer having no direct involvement in the restructure. 

Restructures also includes changes to the taxpayers’ ‘material’ related party financing arrangements such as introduction of new arrangements, termination of existing arrangements (prior to maturity), replacing borrowings with private credit arrangements or significant changes to the terms and conditions of existing arrangements. The ATO defines arrangements with a capital value of $10m or higher as ‘material’.  

Where the response is ‘yes’, CbCREs will need to: 

• provide a description of the restructure or intangibles arrangement,
• disclose anticipated Australian tax impact and global tax impact of the restructure or intangibles arrangement,
• provide the commercial context and impact of restructure/arrangement,
• provide total capital value of the restructure/arrangement, and
• number of steps in the restructure/arrangement. 

If there was a step plan, then the relevant step plan should also be attached.