Navigating transparency: ATO releases draft guidance for public country-by-country reporting exemptions

Australia’s public country-by-country (CbC) reporting regime, effective for income years commencing on or after 1 July 2024, marks a significant step toward multinational tax transparency.

The ATO has released its draft guidance ‘PS LA 2025/D1 – Public country-by-country reporting exemptions’ (‘draft guidance’) outlining the criteria and requirements for taxpayers applying for full or partial exemptions from public CbC reporting requirements. 

Following on from the ATO’s public consultation process, the draft guidance outlines the exemption process, including criteria, evidence requirements, and the ATO’s decision-making framework. 

For a comprehensive overview of the public CbC reporting requirements, see our summary here.  

What the guidance means for you

If you are subject to the new public CbC reporting regime and considering an exemption, you should:

• Identify applicable grounds for exemption: Evaluate whether exemptions on the grounds of national security, breach of Australian or foreign law, commercial sensitivity, or foreign currency threshold misalignment apply to your situation.
• Assess the severity and specificity of impact: Determine whether disclosure would result in exceptional adverse consequences, such as commercial harm or legal breaches. The impact must be specific, demonstrable, and well-documented.
• Gather robust supporting evidence: Have detailed documentation to substantiate your exemption claim. This may include legal opinions, financial statements, contracts, or other evidence demonstrating the adverse impact of disclosure.
• Consider timing: Decide when to apply for the exemption, noting that only one exemption decision is made per period.

Exemption grounds for public CBC reporting

The Commissioner has discretionary authority to grant full or partial exemptions from public CBC reporting obligations for one reporting period at a time. 

A taxpayer may apply for an exemption on any grounds; however, there must be exceptional circumstances where disclosure would be inappropriate. The draft guidance outlines five primary grounds: 

1) Commercial sensitivity

• Disclosure of commercially sensitive information that would result in severe consequences may justify an exemption.
• Factors include the nature, value, secrecy, and strategic importance of the information.
• The applicant must explain how specific disclosures could be used against the business.

2) National security

• Disclosure may compromise Australia's or another jurisdiction’s national security.
• Examples include revealing secret locations, personnel, or contracts related to defence, intelligence, or law enforcement.
• The applicant must demonstrate how specific disclosures would adversely impact national security.

3) Breach of Australian law

• If disclosure would breach an Australian law, this may justify an exemption.
• The application must specify the law and explain how the disclosure breaches it.
• Conflicts with State or Territory laws are considered, but Commonwealth law prevails.

4) Breach of foreign law

• Disclosure that breaches the law of another jurisdiction may support an exemption.
• The law must be specified, and the application must explain which reporting obligations are affected.
• Laws designed to disrupt Australia’s transparency regime may weaken the exemption claim.

5) Foreign currency threshold misalignment

• If an entity is not subject to a public CBC regime in its ‘home’ jurisdiction but meets the reporting revenue threshold in Australia due to currency fluctuations, this may support an exemption.
• The entity must provide financial statements and evidence of thresholds in other jurisdictions.

Application process

Entities must submit a written exemption request with supporting documentation. Applications are assessed case-by-case and should include:

• Explanation of the exemption rationale.
• Supporting evidence of adverse impacts. 
• Relevant legal and financial documents.

Entities may apply before or after the end of the relevant income year, but only one exemption decision is made per period. If denied, the entity may appeal to the Federal Court under judicial review provisions.

While transparency remains the cornerstone, the ATO acknowledges that exceptional circumstances may warrant the Commissioner’s discretion. Entities seeking exemption must present compelling, well-documented cases that align with the regime’s objectives.

If you would like to discuss any of the information contained in this Client Alert, please get in touch.

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