Proposed new Public Country by Country Reporting

11 April 2023

In brief

The Australian government has released draft legislation to require certain large multinationals (known as Country by Country (CbC) reporting parent entities) to publicly disclose the information in their CbC reports broken down by jurisdiction, as well as publicly disclose other new tax and financial information (‘additional information’) - also by each jurisdiction - not currently disclosed in confidential CbC reports. If legislated, this would be the first unrestricted world-wide mandated public reporting of all CbC report data combined with additional information by jurisdiction. It would apply to any large multinational enterprise (MNE) doing business in Australia through an Australian resident entity or Australian permanent establishment, regardless of whether its group parent is an Australian or foreign entity. 

If enacted, public CbC reporting would be required for the 2023-24 and later income years, and is in addition to the current confidential CbC report provided to the ATO and/or foreign tax authorities. 

The draft law is open for consultation until 28 April 2023, which is a shorter consultation period than for other recent announcements. 

The additional information required to be publicly disclosed includes:

  • a description of the group’s “approach to tax”,
  • the group’s effective tax rate in each jurisdiction, 
  • expenses from related party transactions in each jurisdiction, and 
  • a list of intangible assets (and their book value) held by the group in each jurisdiction.

The requirement to publicly report this additional information is unique globally and not required by the voluntary Global Reporting Initiative on tax (GRI 207), nor Australia’s current confidential CbC reporting regime, nor similar public CbC and public tax strategy reporting in the EU and the UK respectively.

The proposed public CbC reporting measures follow the release in March 2023 of draft legislation related to another transparency measure which will require Australian public companies (both listed and unlisted) to publish a ‘consolidated entity statement’ that contains additional information about their subsidiaries including their tax residency (based on the Australian domestic definition of residency), a breakdown of their ownership and the entity type. For more information regarding this measure, refer to the relevant PwC Tax Alert.

In detail

Who is required to prepare public Country by Country reports?

Unless exempt, the new measures will apply to CbC reporting parent entities who are members of a CbC reporting group. In this regard, a CbC reporting parent is an entity that:

  • is not an individual, 
  • has annual global income of AUD 1 billion of more, and
  • is not controlled by any other member of the CbC reporting group.

A group of entities will broadly comprise a CbC reporting group where they:

  • are not individuals, and
  • are part of a single consolidated group for accounting purposes, or would be on the assumption that the notional CbC reporting parent were a listed company using accounting principles or commercially accepted principles related to accounting.

The measures apply to entities that are “constitutional corporations”, which broadly refers to domestic corporations of a trading or financial character, but is also defined to include all corporations formed outside Australia. The draft legislation expressly includes CbC reporting parent entities that are trusts or partnerships provided the relevant trustee or all partners are constitutional corporations. 

The draft legislation allows the Commissioner to exempt specific entities, or a class of entities, from the public CbC reporting requirements. The draft explanatory memorandum foreshadows this power may be used to exempt government related entities that are subject to alternative disclosure or accountability regimes such as government budget processes. It is not clear how broadly this discretion is intended to be used, and whether, for example, the Commissioner would exercise his discretion to exempt entities that have already adopted, or report under, other transparency regimes such as the GRI 207. 

What information is required to be reported?

CbC reporting parents will be required to provide their public CbC reports to the Commissioner in an ATO-approved form within 12 months after the end of the income year to which the report relates. The ATO must then, as soon as practicable, publish the report on an (as yet) unspecified Australian Government website. 

The public CbC report must include a description of the group’s “approach to tax”. This would generally include details around the group’s tax strategy, who reviews and approves the tax strategy, the group’s approach to regulatory compliance and how the approach to tax is linked to the business and sustainable development strategies of the organisation. 

In addition, the following information is required to be disclosed at a group level for each jurisdiction:

  • a description of the group’s main business activities, 
  • the number of employees as at the end of the income year,
  • the group’s revenue from related parties that are not tax residents in that jurisdiction, and from unrelated parties, 
  • the group’s profit and loss before income tax,
  • total value of tangible assets held by the group,
  • income tax paid on cash basis by the group,
  • income tax accrued in the current year by the group, and
  • the currency used in calculating and presenting the required information.

As the draft explanatory memorandum notes, the above disclosures have predominantly been adopted from the GRI 207 and are consistent with disclosures included in current confidential CbC reporting. However, the draft legislation also requires four further disclosures:

  • a list of tangible and intangible assets held by the group in each jurisdiction, and book values of those assets,
  • expenses paid to related parties in other jurisdictions,
  • an explanation of why current year income tax accrued differs from the headline tax rate multiplied by profit before tax, and
  • the effective tax rates (ETR) for each jurisdiction (with the ETR to be calculated consistently with how ETR will be calculated for Pillar Two purposes, which is a complex calculation). 

In regards to the last of these disclosures, the draft explanatory materials explain that this requirement has been adopted from GRI 207-4. However in this respect the draft law requirement appears different from GRI 207. GRI 207 requires reconciliation to corporate income tax accrued on profit/loss, whereas the draft law requires reconciliation to income tax accrued (current year). Income tax accrued (current year) is a reporting requirement of Australia’s current confidential CbC reporting regime and the OECD’s BEPS Action 13. This particular reporting requirement was addressed in OECD public consultation in 2020 and may be subject to future definitional refinements by the OECD. This example illustrates the types of complexities that may arise for MNEs from the draft law bridging elements from a voluntary reporting regime (GRI) and a mandatory confidential regime (OECD BEPS Action 13).

The requirement to publicly report this information is unique globally as similar public CbC or public tax strategy reporting in the EU or the UK respectively do not require the disclosure of this information. 

The new reporting obligations are proposed to apply for the 2023-24 and later income years. We note that the proposed start date in the draft legislation is inconsistent with prior announcements and the draft explanatory materials, and if enacted as drafted, could mean early balancing taxpayers are in scope of the rules from 1 January 2023. 

Overview of potential penalties 

The draft explanatory memorandum is clear that penalties will apply for non-compliance and makes reference to the fact that Australia’s tax laws have a number of existing general offence and penalty provisions that could potentially be applied and will need to be considered. There is a wide range of different penalties regimes that can potentially apply resulting in fines and in some cases convictions. Some of the key provisions that may be relevant are:

  1. Failure to lodge on time penalties - section 286-75 of the Taxation Administration Act (TAA)
    Companies that fail to give a document to the Commissioner in the approved form by a particular day can be subject to a penalty. The penalty rate is calculated by reference to the number of days for which the document is outstanding. For entities that are Significant Global Entities (SGEs) the current penalties range from A$137,500 for up to 28 days late to a maximum of A$687,500 for more than 112 days late. Australian resident companies that are Country by Country reporting parents will automatically be SGEs are therefore potentially subject to these penalties. Non-resident companies that do not have a permanent establishment in Australia will not automatically be SGEs. However, the existing law provides the Commissioner’s with the power to declare such companies an SGE which would then make it possible for the Commissioner to apply these penalties.  
  2. Failure to comply with requirements under a taxation law - 8C and 8E of the TAA
    The exposure draft proposes amendments to section 8C of the TAA under which it will be an offence to fail to publish the required Country by Country information in the manner required (i.e. through providing to the Commissioner in an approved form for publication on a government website). An offence committed under section 8C is punishable on conviction with a fine. Conviction would require the Commissioner of Taxation to prosecute in Court. A first offence conviction would attract a maximum fine of A$5,500 (20 penalty units). The maximum fine for conviction of a second offence is A$11,000 (40 penalty units). Conviction of a third offence is punishable by a maximum penalty of A$68,750 (50 penalty units).

    It is also possible on the third offence to prosecute a natural person deemed responsible for the offence on behalf of the company with punishment on conviction being imprisonment of up to a maximum of 12 months. This person can be anyone (whether an officer of the company or not) who is concerned in, or takes part in, the management of the corporation. The law places the legal evidentiary burden on the defendant to prove that they;
    1. Did not aid, abet, counsel or procure the act or omission of the corporation concerned, and
    2. Was not in any way, by act or omission, directly or indirectly, concerned in, or party to, the act or omission of the corporation.

      There is no specific legislative basis under the TAA to restrict prosecutions under 8E to only Australian residents.
  3. False or misleading statements
    The Commissioner can apply a penalty for a false or misleading statement made to a taxation officer. This includes omitting to include a matter from a statement that makes it misleading. 

    Penalties can be imposed for each statement or omission depending on the degree of behaviour associated with the false or misleading statement. Failure to take reasonable care for an SGE can result in a penalty of approximately A$5,500 whereas intentional disregard can be A$16,500 per offence. 

We note that each of these penalty regimes requires action on the part of the Commissioner of Taxation. The penalty regime is complex and the lack of clarity in the exposure draft and absence of guidance from the Commissioner of Taxation as to how the existing penalty regime will be applied to non-residents is likely to be a concern for many companies.  This is particularly the case given the proposed start date of 1 July 2023 and the additional information requirements over and above existing information in Country by Country reports some of which may not be in existence.

The Takeaway

With only a short lead time until the proposed start date of these measures, taxpayers should ensure management and their Board are made aware of this proposed new public CbC reporting requirement. In this regard, multinationals subject to other transparency reporting, such as confidential CbC reporting, the GRI 207 or the UK or EU tax transparency measures, should ensure reported information is consistent with other transparency information released.

Management and the Board should agree the internal procedures required to collate, review and approve the release of public CbC information. It will be vital to establish and agree processes for the collection and review of tax data, including the level of sign off required before any disclosures are released publicly. Consideration should also be had to what commentary might be helpful to provide with the required disclosures to provide context and ensure the information is not misinterpreted by the public or media. 

Taxpayers should ensure they have a tax strategy and tax risk management and governance framework in place which underpins and supports the organisation’s public statement regarding their ‘approach to tax.’ Existing documentation should be reviewed and updated by Management and the Board to ensure they are fit for purpose. 

Chris Vanderkley

Special Counsel, Melbourne, PwC Australia

+61 412 170 744


Greg Weickhardt

Partner, Global Tax, Melbourne, PwC Australia

613 8603 2547


Jonathan Malone

Partner, Global Tax, Sydney, PwC Australia

+61 408 828 997


Nick Houseman

Australian Transfer Pricing Leader, Sydney, PwC Australia

+61 2 8266 4647


Sarah Saville

Partner, Tax Reporting and Innovation, Sydney, PwC Australia

+61 421 052 504


Sarah Stevens

Managing Director, Tax, PwC Australia

+61 2 8266 1148