To all of our accounting firm clients and potential clients, we wanted to alert you to the round of "Failure to lodge" notices that the ATO is now issuing. We recently received one from an accounting firm who as you can imagine, called us in absolute panic! The failure to lodge was for $525,000 penalty!!! Okay, I think I have your attention now!
Why might I receive this letter?
You will receive this letter if your clients did not lodge the relevant CbC reporting statements on time.
What is CbC reporting?
CbC reporting which takes effects from income years commencing on or after 1 January 2016 is part of the international measures to combat
tax avoidance through more comprehensive exchanges of information between tax jurisdictions. For more information, please visit:
Who must do it?
Entities that are or part of a multinational group with an annual global income of more than AUD$ 1 billion. This means even though your
client’s Australian operations are small, they may still fall under the CbC reporting requirements!
When must it be done?
The CbC reporting statements need to be lodged electronically within 12 months after the end of the income year. Extensions may sometimes be provided by the ATO due to various reasons. If you are aware of your clients that have lapsed the lodgement date, we are able to help and liaise with the ATO to ensure the best outcome. Better late than never!
I'm just the tax agent, I don't do international tax, isn't it the parent companies responsibility?
No, as the registered tax agent for the client you have a legal obligation to advise the client of their requirements under Australian tax law. This is the Australian domestic tax law in relation to CbC reporting which is covered in the International Dealings Schedule of the Income Tax Returns.
But shouldn't the parent company lodge the Master File?
Not always, it depends on their domestic requirements and timing, never assume, ASK!
What's the risk?
$525,000! The risk for the client is obviously this penalty, but when they receive such a penalty and are forced to pay it, who do you
think they are going to come after for not advising them of this requirement to lodge? Yes you guessed it, you as the tax agent. So what do
we recommend you do? ASK the client the question, and do it in writing, and do not stop until you get a confirmation back in writing. You
need to show you did your best efforts to avoid liability. The standard 'tax letter' at the end of compliance is not going to be
satisfactory. Want help, shoot us a quick email, and we are happy to share with you a paragraph you should email to your client, keeps the
client out of trouble, and makes you look good! Email to email@example.com
and I would be happy to share this with you.
Need any help?
As always, we are here to help support you to provide transfer pricing solutions to your clients. We go out of our way to pump you up to
your clients and get you kudo's for referring such a complicated area to an expert. We have the experience in dealing with the ATO with
regards to any transfer pricing matters to ensure the best outcome for your clients. Have any other accounting friends who don't have a
spare $525,000 to pay a penalty? Send them across this email and get them to register to receive our updates. We will be shortly running our
workshops again in Melbourne, Sydney and Brisbane. Our last workshop in Brisbane sold out in less than 24 hours!
Contact Transfer Pricing Solutions. We can assist with the preparation of transfer pricing documentation locally and regionally, Master File and Local File to comply with the OECD and also local legislation.
+61 (3) 59117001
+ 603 2298 7153
Contributed by our Transfer Pricing Manager Hong Chuan Tan
Hong Chuan is the Global Manager of Transfer Pricing Solutions and Director of Transfer Pricing Solutions Malaysia. He has extensive transfer pricing experience across the Asia Pacific region, assisting clients with transfer pricing planning and risk management, Country-by-Country reporting statements, transfer pricing documentation, tax effective supply chain management and dealing with the Malaysian Inland Revenue Board as well as the Australian Taxation Office.
Hong Chuan loves writing and is a content writer for Institute of Singapore Chartered Accountants. Hong Chuan is currently based in Melbourne, Australia.
Hong has managed a portfolio of clients comprising companies from a broad range of industries such as mining, electrical and electronics, plastic products, construction and property development, hotels, real estate, oil and gas amongst others.
In his spare time, he enjoys playing badminton and swimming. He is also a traveler and has lived in Australia and Malaysia.
Thec Covid-19 pandemic has triggered the most severe recession and is causing enormous damage to the world economy. The economic downturn will impact a group’s transfer prices, analysis and documentation, more so with the BEPS Action Plans in place and the high level of transfer pricing scrutiny across the globe.
JobKeeper forms part of taxable income in the tax return. Makes sense, it is a subsidy against wages, so I am sure there are no surprises there, but how do you assess the arm’s length financial outcomes of the entity for transfer pricing purposes?
The ATO expect that Australian entities will retain the benefit of the JobKeeper payment they receive. So how do you treat the JobKeeper payments for transfer pricing purposes?