Australia prepares tax transparency disclosure rules for public companies

The measures will apply to both listed and unlisted companies, starting from financial years commencing on 1 July 2023. They are based on a strategy document released for consultation in August 2022 that aimed to improve multinational enterprises’ (MNEs’) tax transparency and protect Australia's domestic tax base from the risks stemming from the use of excessive debt deductions.

Public companies will also have to provide a 'consolidated entity statement' as part of their annual financial reporting regime.

The legislation will also amend the thin capitalisation rules to limit MNEs’ debt deductions to 30 per cent of tax earnings before interest, taxes, depreciation and amortisation. It further amends the Income Tax Assessment Act 1997 to remove a deduction for interest expenses incurred to derive dividends from foreign subsidiaries and other types of income. Usually, this will be where an Australian company has borrowed funds to invest in or to acquire equity interests in a foreign subsidiary.

Comments can be submitted to the Department of the Treasury until 13 April 2023.

According to consultancy EY, the government still needs to consult on ‘other elements of its multinational tax integrity package’, including proposed future tax transparency measures to prevent MNEs from making deductions for intangibles.

Sources

• EY
• Australian Department of the Treasury
• DLA Piper (August 2022)