ATO extends reportable tax position regime to large CIVs and superannuation funds

While official rules are yet to be finalised, this is a meaningful expansion that will bring high-income superannuation funds and large CIVs into a reporting framework previously reserved for large corporates. Early preparation will be important to manage compliance risk and ensure positions are properly evidenced.

Who is likely to be affected

The RTP schedule is designed to gather information from the largest taxpayers. Based on thresholds used for companies, the ATO is expected to focus on: 

• Economic groups with total business income (TBI) of $250m or more; and
• Trusts, Partnerships or Funds within those groups with TBI above $25m.

TBI is calculated at the economic group level, with no offsets for income of one entity that is an expense in another entity of the same economic group. This means trusts or superannuation funds may be required to report even if companies in the same economic group already lodge an RTP schedule.

For example, for a foreign-owned hotel business group with multiple trusts owning land and companies operating hotels and whose TBI exceeds $250m, any trusts whose TBI exceeds $25m could need to lodge an RTP schedule. 

Tax positions to be disclosed

Based on our analysis and experience with companies already in the RTP regime, we expect the ATO to apply similar disclosure categories for superannuation funds and CIVs:

• Category A: Material positions (i.e. those with tax risk of $3m or more), including positions that are reasonably arguable or more likely to be incorrect than correct.
• Category B: Material tax-related provisions, and current or contingent tax liabilities recognised in financial statements.
• Category C: Specific arrangements highlighted in Taxpayer Alerts, including:
  • TA 2025/1 Managed investment trusts: restructures to access the managed investment trust withholding regime 
  • TA 2020/5 Imputation: use of derivatives to secure franking credits at reduced or nominal economic risk 
  • TA 2019/2 Trusts avoiding CGT by exploiting restructure rollover
  • TA 2018/1 Imputation: transfer of shares around ex-dividend date

We also expect the tax risks in the ATO’s Advice Under Development relevant to CIVs and superannuation funds to be included in Category C once finalised, such as using short derivatives to manage short-term exposure to Australian equities. From our experience, this could expand the range of positions that need to be documented beyond what some corporates currently face.

As with the corresponding regime for companies, the RTP schedule is likely to be required to be lodged together with the corresponding Trust, AMIT, Partnership or Fund tax return.

What you need to do

This change is more than a reporting exercise. It materially expands the RTP regime to non-corporate structures. 

Start by identifying which entities in your group meet the TBI thresholds and reviewing key positions to make sure they are well documented. Early preparation will make tax time smoother and reduce the risk of surprises or penalties (e.g. failure to make statements, making statements that are false or misleading, or taking a position that is not reasonably arguable).

We can help you work through these steps, from assessing your positions to setting up processes that give confidence your RTP obligations are managed effectively. Taking a proactive approach now will put you in a strong position when the rules take effect.

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