Section C: Category C reportable tax positions

You need to disclose Category C reportable tax positions in section C.

There are no materiality thresholds for Category C disclosures. You must disclose a Category C reportable tax position if you answer yes to any of the questions covered by Category C.

Unless otherwise specified, the questions refer to the arrangements or transactions in place at any time in the income year covered by the tax return the schedule accompanies.

We update Category C questions throughout the year. You should use the electronic version of this guide to ensure you are reporting on all current Category C questions.

Category C questions referencing a taxpayer alert may ask you to disclose arrangements that either:

• have particular characteristics, in which case you must disclose the arrangement even when either
  • your arrangement is not covered by the examples in the taxpayer alert
  • the mischief described by the taxpayer alert is not present in your arrangement
   
• are described in the taxpayer alert, in which case you must interpret the question widely and make a disclosure even if
  • some features of your entity's arrangement are different to those described in the examples in the relevant taxpayer alert
  • your entity's arrangement doesn't contain all features of the arrangement(s) described in the taxpayer alert
  • you don't view the arrangement as aggressive, inappropriate, contrived or artificial
  • you don't consider a tax benefit arose from the arrangement
  • there is an observable third-party market or long standing practice for this arrangement.
   

You may provide feedback on the wording of the current Category C questions by email to ReportableTaxPosition@ato.gov.au

Did you have any Category C reportable tax positions for the 2019–20 income year?

You must confirm if your entity has any Category C disclosures.

If you select no – go to Section D: Declaration and signature.

If you select yes – the next question will ask how many Category C reportable tax positions you are reporting.

How many Category C reportable tax positions are you reporting?

Enter the total number of Category C reportable tax positions you are reporting.

You will need to follow the instructions for answering individual Category C questions to ensure you make a complete disclosure.

Using the PDF schedule

If you are completing the PDF version, once you enter the number of reportable tax positions you are disclosing and move off the field, the document will automatically display the required number of fields to make the disclosure(s).

You must complete all the mandatory fields for each reportable tax position you are reporting.

Have you discussed this position with the ATO?

You must confirm if you (or another representative of your entity) have previously discussed the disclosure with us, for each disclosure you are making. All fields must be completed for each disclosure you are making, no matter what answer you provide to this question.

RTP Category C question and subcategory

Enter the number of the Category C question you are disclosing under in the RTP Category C question field. If there are subcategories to the question, enter the relevant subcategory in the RTP Category C subcategory field.

If your entity has multiple positions covered by a single question, the question will tell you how to disclose this. You may need to select the appropriate subcategory or make a disclosure for each position.

For all Category C questions, you must make a disclosure if your entity had an arrangement covered by a question at any time during the year. If the arrangement is no longer in place at the time of preparing your entity's tax return, you should note this in the Optional comments field.

Question 1

Did your entity claim a deduction under section 25-90 of the Income Tax Assessment Act 1997 (ITAA 1997) (or subsection 230-15(3) of the ITAA 1997 if you are a TOFA taxpayer) that was incurred in earning income that is non-assessable and non-exempt under both section 23AH of the Income Tax Assessment Act 1936 (ITAA 1936) and section 768-5 of the ITAA 1997?

Refer to Taxation Determination TD 2016/6 for further guidance.

Question 2

Did your entity fund a special dividend or a share buy-back through an equity raising event at a similar time, where the arrangement is a type, or variation, of an arrangement described in Taxpayer Alert TA 2015/2?

Question 3

Has your entity entered into any arrangement(s), or variation of an arrangement, described in Taxpayer Alert TA 2015/5 involving the use of offshore entities that source goods (procurement hubs)?

Question 4

Question removed due to impacts of legislative changes.

Question 5

Question removed as the information is collected through other means.

Question 6

Has your entity entered into a related party foreign currency denominated finance transaction(s) with related party cross currency interest rate swaps using an arrangement (s), or variation of an arrangement, described in Taxpayer Alert TA 2016/3?

Question 7

Has your entity entered into any arrangement(s) or variation of an arrangement described in Taxpayer Alert TA 2016/4 involving cross-border leasing of mobile assets where related legal entities are interposed between the foreign owner and Australian operator?

If your entity's related party arrangement involves the use, in Australian waters, of non-resident owned mobile offshore drilling units (MODUs), disclose the outcome you have self-assessed using Practical Compliance Guideline PCG 2020/1:

• Subcategory 1: white zone
• Subcategory 2: green zone
• Subcategory 3: amber zone
• Subcategory 4: red zone or if you have not applied PCG 2020/1.

PCG 2020/1 outlines that MODUs include:

• drill-ships
• drilling rigs (including but not limited to submersibles, semi-submersible and jack-up rigs)
• pipe-laying vessels
• heavy-lift vessels.

Enter the relevant subcategory number in the RTP Category C subcategory field.

If your entity's related party arrangement didn't involve the use, in Australian waters, of MODUs then enter 5 in the RTP Category C subcategory field.

If your entity has more than one arrangement you will need to disclose each arrangement separately, unless the criteria for treating similar arrangements or transactions as a single position apply. In this case, record the number of arrangements in the Optional comments field.

Question 8

If your entity is an Australian income tax consolidated group, does it have an offshore permanent establishment that has allocated expenses associated with an intra-Australian group transaction, where the circumstances of the arrangement(s) are the same or similar to those described in Taxpayer Alert TA 2016/7?

Question 9

If your entity has related party dealings involving a centralised services hub arrangement(s), disclose the outcome you have self-assessed using the applicable schedule in Practical Compliance Guideline PCG 2017/1 for each hub arrangement your entity is involved in.

For offshore marketing hub arrangements:

• Subcategory 1: white zone
• Subcategory 2: green zone
• Subcategory 3: blue zone
• Subcategory 4: yellow zone
• Subcategory 5: amber zone
• Subcategory 6: red zone or have not applied Schedule 1.

For offshore non-core procurement hub arrangements:

• Subcategory 11: white zone
• Subcategory 12: green zone
• Subcategory 13: blue zone
• Subcategory 14: yellow zone
• Subcategory 15: amber zone
• Subcategory 16: red zone or have not applied Schedule 2.

Enter the relevant subcategory number in the RTP Category C subcategory field.

Question 10

Has your entity excluded from its thin capitalisation calculations of debt capital (in the current or four prior years) any value of a ‘debt interest’ that has been treated wholly, or partly, as equity under accounting standards?

Refer to Taxpayer Alert TA 2016/9 for further guidance.

Question 11

Is your entity currently involved in a cross-border round robin financing arrangement(s) using an arrangement, or variation of an arrangement, described in Taxpayer Alert TA 2016/10?

Question 12

Was your entity party to an arrangement (in the current or four prior years) separating an integrated trading business into parts that result in trading income being re-characterised into more favourably taxed passive income?

Refer to Taxpayer Alert TA 2017/1 for further guidance.

Question 13

Has your entity claimed the R&D tax incentive using an arrangement, or variation of an arrangement, described in the subcategories below?

• Subcategory 1: Taxpayer Alert TA 2017/2 (construction activities)
• Subcategory 2: Taxpayer Alert TA 2017/3 (any business activities)
• Subcategory 3: Taxpayer Alert TA 2017/4 (agricultural activities)
• Subcategory 4: Taxpayer Alert TA 2017/5 (software development activities)
• Subcategory 5: More than one of the above taxpayer alert subcategories applies.

Enter the relevant subcategory number in the RTP Category C subcategory field.

Question 14

If your entity has a cross border related party debt funding arrangement(s), disclose the outcome you have self-assessed using Schedule 1 of Practical Compliance Guideline PCG 2017/4.

• Subcategory 1: white zone
• Subcategory 2: green zone
• Subcategory 3: blue zone
• Subcategory 4: yellow zone
• Subcategory 5: amber zone
• Subcategory 6: red zone or if you have not applied schedule 1.

Enter the relevant subcategory number in the RTP Category C subcategory field.

Question 15

Question removed as the information is collected through other means.

Question 16

If your entity is an Australian income tax consolidated or multiple entry consolidated (MEC) group, has it entered into any arrangement(s) where either of the following subcategories apply?

• Subcategory 1: the churning rule (in section 716-440 of the ITAA 1997) applies to deny certain cost setting rules
• Subcategory 2: the churning rule didn't apply because your entity didn't satisfy the test in paragraph 716-440(1)(f), as there is no change in the majority economic ownership of the joining entity within the 12-month period before the joining time.

Enter the relevant subcategory number in the RTP Category C subcategory field. Enter the number 1 if both subcategories apply where your entity has two separate positions.

If subcategory 2 applies to your entity's arrangement, provide further details in the Comments field explaining how the arrangement involving your entity didn't satisfy the test in paragraph 716-440(1)(f).

Question 17

At any stage during the income year, did your entity have a cross border financing arrangement(s) with an international related party (including via back to back arrangements through third parties) where it claimed a tax deduction for interest, or an amount in the nature of interest, and interest withholding tax wasn't remitted because a withholding tax liability isn't expected to arise within the next 18 months.

Refer to Taxpayer Alert TA 2018/4 for further guidance.

Question 18

Did your entity claim a deduction under section 25-90 of the ITAA 1997 (or subsection 230-15(3) of the ITAA 1997 if you are a TOFA taxpayer) for costs in relation to debt interests incurred in deriving non-assessable non-exempt income under sections 23AI or 23AK of the ITAA 1936 or Subdivision 768-A of the ITAA 1997?

Refer to Taxpayer Alert TA 2009/9 for further guidance.

Question 19

If your entity has reached a formal settlement agreement or future compliance arrangement with us for the current income year, do either of the following subcategories apply

• Subcategory 1 – your entity breached one or more of the terms of the settlement deed or future compliance arrangement
• Subcategory 2 – changes in the relevant and material facts, as disclosed in the deed or arrangement, have occurred.

Enter the relevant subcategory number in the RTP Category C subcategory field. Enter the number 1 if both subcategories apply where your entity has two separate positions.

Question 20

Has your entity participated in any arrangement(s) using securities lending and derivative contracts where your entity, or another participant, has received franking credits using an arrangement, or variation of an arrangement, described in Taxpayer Alert TA 2018/1?

Question 21

Are you aware of any unamended mistakes or omissions in any single tax return lodged by your entity within four years of the lodgment date of this RTP schedule where, if all mistakes or omissions in that return are amended, it would give rise to either:

• more than $1.5 million in tax being payable (or would have been payable had it not been offset, for example by losses from prior years)
• more than $5 million in losses (including capital losses).

For the purposes of this calculation, only count mistakes and omissions that your entity hasn't previously notified to us.

Question 22

If your entity has restructured out of any arrangement(s) (in the current or previous income year) to which the hybrid mismatch rules applied, or would have applied had the arrangement(s) remained in place, disclose the subcategory that describes your entity's current position:

• Subcategory 1 – all of the restructured arrangements qualify as low risk under Practical Compliance Guideline PCG 2018/7.
• Subcategory 2 – one or more of the restructured arrangements don't qualify as low risk under Practical Compliance Guideline PCG 2018/7.

In considering whether the hybrid mismatch rules would apply you must disregard dual inclusion income.

Enter the relevant subcategory number in the RTP Category C subcategory field.

Question 23

If your entity has financial arrangement(s) involving cross border related party derivative transactions, disclose the outcome you have self-assessed using Schedule 2 of Practical Compliance Guideline PCG 2017/4:

• Subcategory 1: white zone
• Subcategory 2: green zone
• Subcategory 3: blue zone
• Subcategory 4: yellow zone
• Subcategory 5: amber zone
• Subcategory 6: red zone or if you have not applied Schedule 2.

Enter the relevant subcategory number in the RTP Category C subcategory field.

Question 24

If your entity has related party dealings involving an inbound distribution arrangement(s), in the RTP Category C subcategory field enter either:

• 1 – where we have previously reviewed the arrangement(s)
• 3 – where your entity hasn't self-assessed the risk zone of the arrangement(s) using PCG 2019/1
  • if your entity has adopted the distributor simplified transfer pricing record keeping option in PCG 2017/2, record 'PCG 2017/2 applied' in the Optional comments field
  • if paragraph 49 of PCG 2019/1 applies to your entity's arrangement(s), record which of the exclusion categories (from paragraph 49) applies in the Optional comments field
   
• the appropriate number from the table below, where your entity has self-assessed the risk zone of the arrangement(s) using PCG 2019/1.

RTP Category C subcategory field – risk assessment ratings

Category	Low risk	Medium risk	High risk
General distributor – Schedule 1 (not in an industry sector specifically covered by a separate schedule)	11	12	13
Category 1 Life science industry – Schedule 2	21	22	23
Category 2 Life science industry – Schedule 2	31	32	33
Category 3 Life science industry – Schedule 2	41	42	43
Category 1 ICT industry – Schedule 3	51	52	53
Category 2 ICT industry – Schedule 3	61	62	63
Motor vehicles industry – Schedule 4	71	72	73

Select the industry sector you believe best describes the industry in which your entity operates. If the schedule for the industry sector you have selected has different categories of activities that generate value, select the category you believe best reflects your entity's inbound distribution arrangement.

Calculate your entity's five year weighted average EBIT margin based on financial information without making adjustments for comparability purposes. This reflects the way the profit markers in PCG 2019/1 have been constructed.

If your entity hasn't lodged tax returns for each of the five preceding income years, calculate its EBIT margin on a weighted average over the preceding years of consecutive lodgments.

If your entity has an inbound distribution arrangement but you can’t determine an EBIT margin for the arrangement, you should answer with Subcategory 3 indicating you didn't apply PCG 2019/1.

Question 25

Has your entity claimed deductions for expenses incurred under an arrangement(s) with offshore parties and used intangible assets held by an offshore party in connection with this arrangement(s), where one of the following subcategories applies:

• Subcategory 1 – the arrangement(s) doesn't appropriately recognise an amount as consideration for the use of the intangible assets.
• Subcategory 2 – your entity hasn't applied the arm’s length principle in determining the appropriate consideration for the use of the intangible assets.
• Subcategory 3 – your entity has considered the arm’s length principle in determining the appropriate consideration for the use of the intangible assets, but the arrangement isn't covered by section 284-255 (Taxation Administration Act 1953) compliant transfer pricing documentation.

Enter the relevant subcategory number in the RTP Category C subcategory field.

If multiple subcategories apply to a single arrangement record the lowest subcategory (for example if both subcategories 1 and 2 apply, record subcategory 1).

If your entity has more than one arrangement you will need to disclose each arrangement separately, unless the criteria for treating similar arrangements or transactions as a single position apply. In this case, record the number of arrangements in the Optional comments field.

Refer to Taxpayer Alert TA 2018/2 for further guidance.

Question 26

If your entity is a MEC group, has it entered into an arrangement(s) or variation of an arrangement described in Taxpayer Alert TA 2019/1, where a group CGT asset (with a large unrealised capital gain) is sold through an eligible tier 1 company (with significant intra-group debt), which is subsequently sold to a third party who undertakes to extinguish the intra-group debt?

Optional comments

You can disclose additional information relating to the individual Category C position in the Optional comments field.

While there is no requirement to complete this field, we encourage you to briefly explain your entity's arrangement(s). Doing so may mean we:

• don't need to contact you for further information
• are able to ask more targeted questions, if we do require further information.

Using the PDF schedule

The field will accept 3,000 characters or approximately 500 words. You can attach additional information if required.

Once information has been entered, the field will expand when you click on or move onto another field. You will then be able to view all the text in the Optional comments field.