Australia: Changes to country-by-country reporting exemption process

The Australian Taxation Office (ATO) introduced changes to the country-by-country (CbC) reporting exemption process for all exemption requests submitted after January 1, 2025 (irrespective of income year for which exemptions are sought).

There are now only three specific CbC exemption categories:

• Australian CbC reporting parent, or a member of a group consolidated for accounting purposes with an Australian CBC reporting parent, and the group has no foreign operations (i.e., no constituent entity or permanent establishment (PE) outside Australia)
• Annual global income of foreign CbC reporting parent of A$1 billion or more but below the CbC reporting foreign currency threshold in the jurisdiction of the foreign CbC reporting parent
• CbC reporting entity in the preceding year due to membership of a group of entities but left that group during the CbC reporting year due to a demerger or sale to a third party and will not be a CBC reporting entity under new structure for the foreseeable future (Master file exemption also available)

There may also be exemptions available in exceptional and limited circumstances, for example to preserve conformity with the OECD BEPS Action 13 recommendations.

The key differences from the current regime are as follows:

Local file exemptions have been removed (including the automatic one for Australian resident companies that disclose "No" to Question 26 on the Income Tax Return) for reporting periods starting on or after January 1, 2024, with some exceptions for tax-exempt entities under Division 50 and National Tax Equivalent Regime entities. As such, CbC reporting entities will generally (at a minimum) be required to do a short form Local file.

In general, exemptions for Master files will no longer be available except in situations in which a CbC reporting entity leaves a group in the reporting year and will no longer be a CbC reporting entity under the new structure. This is likely to affect domestic CbC reporting groups, foreign CbC reporting groups whose global income falls above A$1 billion but below the foreign currency reporting threshold and only have a Master file obligation in Australia.

There are no significant changes to the exemption regime for CbC reports, with exemptions remaining for domestic CbC reporting groups and foreign CbC reporting groups whose global income falls above A$1 billion but below the foreign currency reporting threshold.

There will no longer be self-assessing fast track exemptions and instead exemptions will need to be requested (by email) and include relevant substantiating evidence to be reviewed and approved by the ATO. Examples of evidence would include the tax return and financial statements.