Country-by-country reporting entities

Example 1: Transitional year scenario

From its consolidated financial statements, Australian resident entity, Ausco, has an annual global income of A$2 billion for both of its income years ended 30 June 2019 and 30 June 2020. It is not controlled by any other entity. It consolidates the accounts of its wholly owned Australian resident subsidiaries together with a foreign resident subsidiary operating a permanent establishment (PE) in Australia.

Each of the Australian resident subsidiaries and the foreign resident subsidiary with the Australian PE has an annual income of around A$400 million for each income year.

Ausco and each subsidiary will have CBC reporting obligations for the income year ended 30 June 2020 if they were CBC reporting entities for the income year ended 30 June 2019. Even though the CBC reporting entity definition only applies for income years starting on or after 1 July 2019, for the purposes of determining Ausco's CBC reporting obligations for the income year ended 30 June 2020, the CBC reporting entity definition can look back to a period before 1 July 2019.

Ausco is a CBC reporting parent and a CBC reporting entity for the income years ended 30 June 2019 and 30 June 2020 as it has an annual global income of A$1 billion or more. Despite each subsidiary having an annual income under A$1 billion, each subsidiary is also a CBC reporting entity for each of these income years because each is a member of a group of entities consolidated for accounting purposes and Ausco is another member of the group who is a CBC reporting parent for the group.

Therefore, Ausco and its subsidiaries will have CBC reporting obligations for the income years ended 30 June 2020 and 30 June 2021. Whether these entities had CBC reporting obligations for the income year ended 30 June 2019 will depend on whether they were an SGE for the previous income year (ended 30 June 2018).

The entities that are corporate tax entities will also have a GPFS obligation for the income year ended 30 June 2020 if they have not lodged a GPFS with ASIC for the financial year that is most closely corresponding to the income year. Whether these entities also had a GPFS obligation for the income year ended 30 June 2019 will depend on, among other things, whether the entities were an SGE for that income year (see Example 1 in Significant global entities).

Unlike their CBC reporting obligations for the income year ending 30 June 2021 which is determined by their CBC reporting entity status for the income year ended 30 June 2020, whether these entities will be required to provide a GPFS for the financial year most closely corresponding to the income year ending 30 June 2021 will depend on, among other things, whether they will be CBC reporting entities for that income year.

Example 2: Partnership scenario

Vanilla Private is a partnership that does not prepare audited consolidated financial statements for accounting purposes. As it is an Australian resident, the relevant stock exchange for applying the notional listed company group rules would usually be the Australian Securities Exchange (ASX). Under the ASX listing rules, if Vanilla Private were a listed company, it would be required to apply Australian accounting standards including AASB 10.

In applying Australian accounting standards, Vanilla Private concludes that it is not controlled by any other entity and that it controls several resident subsidiaries together with a foreign resident subsidiary, which it would be required to consolidate had it been a listed company. Given this, Vanilla Private concludes that it has an annual global income of A$2 billion for the income year ended 30 June 2020.

Vanilla Private is a CBC reporting parent and a CBC reporting entity for the income year ended 30 June 2020 as it has annual global income A$1 billion or more. The Australian resident subsidiaries and the foreign resident are also CBC reporting entities for the same period. This is because each entity is a member of the notional listed company group and Vanilla Private is another member of the group who is the CBC reporting parent for the group.

Therefore, each of the entities (except for the foreign subsidiary) in this group will have CBC reporting obligations for their income year ending 30 June 2021. Additionally, each entity (except for the foreign subsidiary) that is a corporate tax entity, and that has not lodged a GPFS with ASIC for the financial year most closely corresponding to the income year, will need to lodge a GPFS for the financial year most closely corresponding to the income year ended 30 June 2020. Vanilla Private, not being a corporate limited partnership, would not meet the definition of corporate tax entity and would not have a GPFS obligation.

The same entities will also have CBC reporting obligations for their income year ended 30 June 2020 if they conclude that Vanilla Private had the requisite amount of annual global income to make it a CBC reporting parent for the income year ended 30 June 2019.

For guidance on whether Vanilla Private and the entities it controls are also an SGE for the income year ended 30 June 2020, see Example 2 in Significant global entities.

Example 3: Investment entity scenario

Fund LP is a private equity fund headquartered in the United Kingdom (UK) that takes the legal form of a limited partnership. It is a corporate limited partnership for Australian tax law purposes. It qualifies as an investment entity under the accounting rules that apply to entities listed in that country. It has invested in multiple groups of companies around the world and operates a permanent establishment (PE) in Australia. It does not prepare consolidated financial statements. Instead, Fund LP measures each investee company at fair value through profit or loss in accordance with the UK accounting standards and has an income of A$900 million including the income attributable to the Australian PE for the income year ended 30 June 2020.

Fund LP is neither a CBC reporting parent nor a CBC reporting entity for the year ended 30 June 2020 because it does not have the requisite amount of annual global income once the investment entity exception to consolidation is applied. As a consequence, it will not have a GPFS obligation for that year and will not have a CBC reporting obligation for the income year ending 30 June 2021.

Any entities that Fund LP controls, however, should consider whether they are members of a CBC reporting group and have a CBC reporting parent with the requisite annual global income.

For example, if Fund LP controls a corporate group that is headquartered in Australia (Australian sub-group), and the parent of the sub-group consolidates the sub-group and has A$1 billion or more annual global income for the income years ended 30 June 2019 and 30 June 2020, each entity of that sub-group will have a CBC reporting obligation for the income years ending 30 June 2020 and 30 June 2021. Similarly, each entity of that group that qualifies as a corporate tax entity, and that has not lodged a GPFS with ASIC for the financial year most closely corresponding to the income year, will need to lodge a GPFS for the financial year most closely corresponding to the income year ended 30 June 2020.

For guidance on whether Fund LP and the investee companies are SGEs, see Example 3 in Significant global entities.

Example 4: Immaterial entity scenario

Foreign Co is a privately-owned company resident in Japan. It owns and controls several subsidiaries around the world including a fledgling Australian resident company, Small-time Private Co, which has an income year end of 30 June.

Foreign Co prepares consolidated financial statements for its shareholders based on Japanese GAAP, which can be used by listed companies in Japan, and its annual global income for its financial years ended 31 March 2020 was the equivalent of A$3 billion. Foreign Co considers Small-time Private Co immaterial and does not include it in its consolidated financial statements as permitted under Japanese GAAP.

Small-time Private Co was not a member of the group consolidated for accounting purposes represented in Foreign Co's financial statements.

Foreign Co is a CBC reporting parent and a CBC reporting entity because its annual global income is A$1 billion or more. Small-time Private Co is a CBC reporting entity for its income year ended 30 June 2020 as it is a member of a notional listed company group headed by Foreign Co. It is a member of that group regardless of whether Foreign Co prepares global financial statements and regardless of whether it is considered immaterial by Foreign Co.

Given its CBC reporting entity status for the income year ended 30 June 2020, Small-time Private Co has CBC reporting obligations for its income year ending 30 June 2021. Assuming it has not lodged a GPFS with ASIC for the financial year most closely corresponding to that income year, it will also be required to lodge a GPFS for the financial year most closely corresponding to the income year ended 30 June 2020.

If Foreign Co's annual global income for its financial year ended 31 March 2019 was A$1 billion or more, Small-time Private Co would be a CBC reporting entity for its income year ended 30 June 2019. As a consequence, it will also have CBC reporting obligations for its income year ended 30 June 2020.

For guidance on whether Foreign Co and Small-time Private Co are SGEs for the income year ended 30 June 2020, see Example 4 in Significant global entities.

Example 5: Private group that does not consolidate other entities

Frederick Private Pty Ltd (Frederick Private) is the holding company of a private group of companies, resident in a foreign jurisdiction but with several subsidiaries operating in Australia. Frederick Private is not required to prepare consolidated financial statements in its country of incorporation. However, the company is advised by its accountant that if it was assumed that Frederick Private had been a listed company, it would have all the requisite elements of control (over the private groups) under the applicable accounting standards and would be required to prepare consolidated financial statements.

Individually, none of the entities that Frederick Private controls would have A$1 billion or more in annual global income. However, if Frederick Private were a listed company that prepared consolidated financial statements, its annual global income would be over A$1 billion for each income year ended 30 June 2019 and 30 June 2020.

For the income year ended 30 June 2019, Frederick Private would not be an SGE because it did not prepare consolidated financial statements that show an annual global income A$1 billion or more. However, under the notional listed company group rules of the SGE definition, which have application to income years commencing from 1 July 2019, Frederick Private would be an SGE for the year ended 30 June 2020. Similarly, the entities that would have been consolidated by Frederick Private had it been a listed company, would also be SGEs for that income year.

As a consequence, the provisions applicable to SGEs may apply to Frederick Private and the entities that it controls for the income year ended 30 June 2020, including the increased SGE penalties, MAAL and the DPT.

In addition, for the income year ended 30 June 2020, Frederick Private would be a CBC reporting parent and it, and all entities that would have been consolidated by Frederick Private had it been a listed company, would be CBC reporting entities. As a consequence, the subsidiaries of Frederick Private operating in Australia will also have CBC reporting obligations for their income year ending 30 June 2021. In addition, the subsidiaries that are corporate tax entities will have GPFS obligations for their income year ended 30 June 2020, if they have not otherwise lodged a GPFS with ASIC for the financial year most closely corresponding to the income year.

Given that Frederick Private's annual global income for the income year ended 30 June 2019 would have been A$1 billion or more had it prepared consolidated financial statements, the subsidiaries that are operating in Australia will also have CBC reporting obligations for their income year ended 30 June 2020.

Example 6: Individuals running a private business

Susan and Nick are both Australian tax residents and are directors and equal shareholders of an Australian company, Sibling Pty Ltd, which owns and runs several restaurants across Australasia. Nick runs and manages the day-to-day operations of the business but does not make strategic decisions. Susan has injected most of the capital but is not involved in the business's day-to-day operations although she remains instrumental in strategic decision making, such as choosing the location of new restaurants. As Susan has injected most of the capital, under the Company's constitution Susan has the casting vote for all major strategic decisions made in the running of the company's operations. In addition to her business endeavours with Nick, Susan also separately owns and runs a homewares corporate group.

Both Nick and Susan receive an equal share of the profits made by Sibling Pty Ltd and run other businesses separately through wholly owned company structures. The annual global income of Sibling Pty Ltd is $1.4 billion for the year ended 30 June 2020.

They consult a Registered Company Auditor who considers the issue of control in respect of Sibling Pty Ltd. The auditor concludes on the facts that Susan has a controlling interest in Sibling Company because of the extent that she controls its business operations as per AASB 10. Further, the auditor concludes that Nick neither controls the operations of the company, nor shares joint control with Susan, because even though he has exposure to variable returns, he does not have the power to affect those returns. This is in addition to the fact that Nick can be overruled by Susan for strategic decisions about the company's operations.

Due to Susan's control of Sibling Pty Ltd, Susan would be an SGE along with any entities that she would have consolidated for accounting purposes had she been a listed company. Sibling Pty Ltd and the entities that are part of the homewares corporate group that Susan owns and runs would be SGEs.

Despite Nick not controlling Sibling Pty Ltd, to the extent he has significant influence over Sibling Pty Ltd, he should consider equity accounting impacts of his investment in Sibling Pty Ltd. Nick would only be an SGE if it can be concluded that his annual global income is A$1 billion or more.

Neither Susan nor Nick can be a CBC reporting parent because individuals cannot be a CBC reporting parent. However, as Sibling Pty Ltd has the requisite amount of annual global income and is not controlled by another entity in the CBC reporting group, it will be a CBC reporting parent and CBC reporting entity.

Sibling Pty Ltd, and the corporate tax entities that it controls that have Australian presence will have GPFS obligations for their income year ended 30 June 2020 if they do not lodge a GPFS with ASIC for the financial year that is most closely corresponding to the income year. They will also have CBC reporting obligations for the income year ending 30 June 2021.

If Sibling Pty Ltd's annual global income for the income year ended 30 June 2019 was A$1 billion or more, it and the entities that it controls that have an Australian presence will also have CBC reporting obligations for their income year ended 30 June 2020.

Example 7: Family partnership scenario

John, Joe and Joanne are siblings that are residents in Australia. Each of them is an equal partner in a partnership called JJJ Partners, which is in the business of property development. The partnership is successful and generates A$1.2 billion in the year ended 30 June 2020. The profits for the year are split equally between them. The income they receive from the partnership comprises their sole source of income.

John, Joe and Joanne consult their Chartered Accountants who inform them that had any of them been a listed company, none of them is required to consolidate the activities of the partnership as none of them has a controlling interest in the partnership. This is borne out by the partnership agreement which outlines their equal share to the profits and the process for resolving disputes, which makes it clear that a unilateral decision cannot be made by one of them over the others; and no single person can influence the amount of a return.

As John, Joe and Joanne do not individually have annual global income of A$1 billion or more, none of them is an SGE. However, the partnership is a GPE and an SGE as it has over A$1 billion of annual global income. As a consequence, the measures applicable to SGEs may apply to JJJ Partners and the entities that it controls for the income year ended 30 June 2020, including increased SGE penalties, MAAL and the DPT.

John, Joe and Joanne cannot be a CBC reporting parent because individuals cannot be a CBC reporting parent. However, JJJ Partners will be a CBC reporting parent and CBC reporting entity for its income year ended 30 June 2020 as it has the requisite amount of annual global income and is not controlled by another entity. Given it has at least one partner that is an Australian resident, it will have CBC reporting obligations for its income year ending 30 June 2021. If JJJ Partners also had the requisite amount of annual global income for its income year ended 30 June 2019, it will also have CBC reporting obligations for its income year ended 30 June 2020.

Example 8: Private investment fund scenario

An investment syndicate that comprises 20 unrelated investors operates the Golden Dragon Company (GDC), which is a private Singaporean holding company. GDC holds multiple equity investments globally and operates a permanent establishment in Australia. Each investor in the syndicate is passive and is not involved in the decisions made by the GDC, and no one investor can affect the returns on their investment. The business purpose of the syndicate is solely to invest funds for returns from capital appreciation or investment income.

Under the relevant accounting rules, GDC is an investment entity and therefore does not consolidate any of its controlled investments within its financial statements. All of the syndicate's investments are measured at fair value through profit or loss in accordance with the relevant accounting standards. GDC's annual global income for the year ending 31 December 2020 is A$1.2 billion. The GDC's annual global income for the same period when disregarding this exception to consolidation is A$1.5 billion.

On consulting their advisers, the investors are informed that under the applicable accounting standards it can be concluded that none of the investors has control over GDC requiring them to consolidate GDC's financial results when calculating their annual global income. Accordingly, assuming the investors have under A$1 billion of annual global income, they would not be SGEs.

In this scenario, GDC is in scope of the provisions that apply to SGEs and CBC reporting entities for the year ending 31 December 2020. GDC is a GPE due to its annual global income of A$1.5 billion when disregarding the exception to consolidation that can apply to investment entities. Therefore, both GDC and its investee companies are SGEs and are potentially in scope of SGE penalties, the MAAL and DPT.

GDC is also a CBC reporting parent because, for the year ending 31 December 2020, even when the investment entity exception to consolidation is considered, its annual global income exceeds the requisite threshold. Therefore, it and the entities it controls are CBC reporting entities. GDC will have a GPFS obligation for the income year ending 31 December 2020 if it has not lodged a GPFS with ASIC for the financial year most closely corresponding to the income year.

GDC will have CBC reporting obligations for its income year ending 31 December 2021. It will also have CBC reporting obligations for the year ending 31 December 2020 if its annual global income was A$1 billion or more for the year ended 31 December 2019.

Example 9: Unit trust scenario

The Faithful Holdings Unit Trust is an Australian resident unit trust that wholly owns a large private group of companies, the Faithful Group, that sells consumer electronics. The unit holders of the Faithful Holdings Unit Trust are solely the eight children of Roberta Faithful, the original mastermind of the family business. While Roberta was the original settlor of the trust, she has no power to remove or change the trustee or to vary the trust deed. Roberta formed the trust to operate as an independent entity; she does not have power to influence its financial returns.

None of the eight children are involved with the strategic decisions of the business nor do they have the capacity to influence the returns received from the Faithful Holdings Unit Trust.

The trustee of Faithful Holdings Unit Trust is Faithful Family Company, whose shareholders are Roberta's eight children, each of whom owns a single share. The trust deed stipulates that Faithful Family Company in its role as Trustee has limited power or practical ability to change existing activities undertaken by the trust. Faithful Family Company has no authority to sell or liquidate any of the trust's assets. Further the trust deed directs Faithful Family Company to pass to each beneficiary a defined proportion of each year’s annual profit.

Faithful Holdings Unit Trust's controlling interest is borne out by its 100% ownership of the Faithful Group. If Faithful Holdings Unit Trust were a listed company, all the entities that it controls would be required to be consolidated and its income would be over A$1 billion for the year ended 30 June 2020.

Therefore, Faithful Holdings Unit Trust is a GPE and it, and the entities that it would have consolidated, are SGEs. This will be so even if the various entities that form the Faithful Group each had income of under A$1 billion for the year ended 30 June 2020. They are therefore potentially in scope of SGE penalties, the MAAL and DPT.

Faithful Holdings Unit Trust is also a CBC reporting parent and a CBC reporting entity for the year ended 30 June 2020. The entities that form the Faithful Group are members of the CBC reporting group and each are a CBC reporting entity for the year ended 30 June 2020. Therefore, Faithful Holdings Unit Trust and the Faithful Group has CBC reporting obligations for the income year ending 2021.

If Faithful Holdings Unit Trust concludes that it would have also been a CBC reporting parent for its previous income year (ended 30 June 2019), it and the Faithful Group would also have CBC reporting obligations for the income year ended 30 June 2020.

As Faithful Holdings Unit Trust is not a public trading trust, it is not a corporate tax entity. This is despite the notional listed company group definition, which requires an assumption Faithful Holdings Unit Trust were a listed company for the purposes of determining the trust's SGE and CBC reporting entity status and identifying the members within the group.

Thus, Faithful Holding Unit Trust will not have GPFS obligations. However, any corporate tax entity within the Faithful Group would be required to lodge a GPFS for the income year ended 30 June 2020 if they do not lodge one with ASIC for the financial year most closely corresponding to the income year.

Example 10: Discretionary trust scenario – joint control

Conductor Company is an operating company. Valour Unit Trust owns 100% of the shares in Conductor Company and does not prepare consolidated financial statements. Valour Unit Trust has two unit holders that are both discretionary trusts, Discretionary Trust 1 (DT1) and Discretionary Trust 2 (DT2), which each hold 50% of the units in Valour Unit Trust. DT1 and DT2 are unrelated. They also share equal voting rights and have an equal amount of power when it comes to affecting the returns of the Valour Unit Trust. In addition to the units in the Valour Unit Trust, DT2 also owns 100% of the shares in Holding Co, which holds a number of other operating entities (separate from those held by Valour Unit Trust).

Under the revised SGE definition, even though Valour Unit Trust does not prepare consolidated financial statements, it has been advised that – as it owns 100% of the shares in Conductor Company – it has control of that entity. On considering the accounting standards, it is concluded that neither DT1 nor DT2 controls Valour Unit Trust, because they each own 50% of the units in Valour Unit Trust and neither has all of the requisite elements of control over Valour Unit Trust under the applicable accounting standards.

As a consequence, neither DT1 nor DT2 would be required to consolidate Valour Unit Trust if either DT1 or DT2 were a listed company. Therefore, the entity to test for the GPE definition is the Valour Unit Trust.

If Valour Unit Trust, as a listed company would have generated A$1 billion or more annual global income for the income year ended 30 June 2020, it and Conductor Company will be SGEs for that income year and potentially in scope of SGE penalties, the MAAL and DPT.

Similarly, Valour Unit Trust and Conductor Company would be CBC reporting entities for the income year ended 30 June 2020. As a consequence, they will have CBC reporting obligations:

• for the income year ending 30 June 2021, and
• for the income year ended 30 June 2020 if they would have met the CBC reporting entity definition for the income year ended 30 June 2019.

Conductor Company would have GPFS obligations for the income year ended 30 June 2020 if it does not otherwise lodge a GPFS with ASIC for the financial year most closely corresponding to the income year. However, Valour Unit Trust does not have GPFS obligations because it is not a corporate tax entity.

Note: If DT1 and DT2 had entered into an agreement that provides DT2 with the ability to exercise the majority of the voting rights – giving DT2 the power over Valour Unit Trust to affect its returns – it may be possible to conclude that DT2 has all of the requisite elements of control over Valour Unit Trust under the applicable accounting standards. If that were the case, DT2 would be the GPE of the notional listed company group and the entities that it controls, including the Holding Co, would be SGEs. DT2 would also be the CBC reporting parent of the group and the entities within the notional listed company group will be CBC reporting entities.

Example 11: Family company and trust scenario

Maximillian is a successful furniture retail businessman in Australia who has three children, Jessie, Jack and Susan.

Maximillian is the sole director and shareholder of two companies, Maxi Finance Company and Maxi-X. Maxi Finance Company is the trustee of the Maxi Family Trust. Maxi Family Trust has a 100% stake in Maxi Family Company, which runs the family business. Maxi-X operates a social media platform.

The Maxi Family Trust is a discretionary trust. Maximillian and his wife are the default beneficiaries and his children are also beneficiaries of the trust. The trust deed stipulates that, on the death of Maximillian and his wife, all assets are to be distributed equally to his children, and Maximillian (and only Maximilian) can remove and replace the trustee unilaterally. Maximilian makes all strategic decisions in relation to both Maxi Finance Company in its capacity as the trustee and as a company and Maxi Family Company. He has power to influence and vary the returns made by the two companies as well as the trust.

Maximilian's tax advisers consider the application of AASB 10 to Maximillian's circumstances, assuming Maximilian were a listed company. Maximillian is informed that the Maxi Family Trust's annual global income for the year ended 30 June 2020 would be A$900 million, if it had prepared consolidated financial statements that are required by listed entities in Australia. The annual global income of Maxi-X for the same period would have been A$600 million.

Maximillian was also advised that his control over the corporate trustee of the family trust is such that, had he been a listed company:

• he would be required to consolidate both the Maxi Family Trust and Maxi-X, and
• as GPE of the group, his income would have exceeded A$1 billion.

Maximillian is an SGE because had he been a listed company, he would have been required to consolidate both the Maxi Family Trust and Maxi-X and his income would exceed A$1 billion. When Maxi Family Trust, Maxi Finance Company and Maxi-X lodge their income tax returns, they will each need to indicate that they are SGEs. The measures applicable to SGEs may apply to Maximillian and the entities that he controls for the income year ended 30 June 2020, including the increased SGE penalties, MAAL and the DPT.

Maximillian is not a CBC reporting parent because individuals cannot be a CBC reporting entity. Additionally, neither Maxi Family Trust nor Maxi-X is a CBC reporting parent and CBC reporting entity because none of them have the requisite amount of annual global income.