PKF worldwide tax updates - Australia

The latest edition of the PKF Worldwide Tax Update newsletter is now available. This issue highlights significant tax changes and amendments from around the globe, with each topic complemented by expert insights from PKF tax advisors.

PKF Australia's contribution to this newsletter was authored by Becky Nguyen from PKF Melbourne. Below, you'll find the key takeaways from her update.

1. Country-by-country reporting - short form local file update

The Australian Taxation Office (ATO) has updated its approach to the short-form local file for country-by-country (CBC) reporting, effective for periods beginning on 1 January 2024. Key disclosures no longer required include:

• The names of Australian employees reporting to overseas personnel
• The names of overseas personnel to whom Australian employees report
• The countries of residence of those overseas personnel

2. Country-by-country report - 31 December lodgment deferral

The ATO has granted an automatic extension for CBC reports due by 31 December 2024. Entities with CBC obligations for periods ending 31 December 2023 now have until 31 January 2025 to lodge their CBC reports (local file, master file, and CBC report). Late filings beyond 31 January 2025 may incur penalties.

3. Pillar two legislation passed by Australian Parliament

On 27 November 2024, Australian Parliament passed key legislation for implementing the global and domestic minimum tax framework (Pillar Two) under OECD's anti-base erosion rules. The legislation includes three bills:

• Taxation (Multinational – Global and Domestic Minimum Tax) Imposition Bill 2024
• Taxation (Multinational – Global and Domestic Minimum Tax) Bill 2024
• Treasury Laws Amendment (Multinational – Global and Domestic Minimum Tax) (Consequential) Bill 2024.

The Imposition Bill introduces top-up taxes, including Australian Domestic Minimum Tax (DMT) for income years starting 1 January 2024, and the Australian Undertaxed Profits Rule (UTPR) from 1 January 2025. The Assessment Bill aligns with OECD’s Pillar Two Global Anti-Base Erosion (GloBE) Rules, while the Consequential Bill covers necessary administrative adjustments. The detailed rules for computing top-up tax are still pending.

4. ASEAN Australia-New Zealand free trade area second protocol

The Customs Amendment Bill 2024 was introduced to amend the Customs Act 1901 to implement the new commitments under the ASEAN-Australia-New Zealand Free Trade Area Second Protocol. Key updates include:

• New record-keeping and verification requirements for goods exported under the Second Protocol;
• Correct preferential tariff treatments, ensuring that goods meet transformation rules;
• Expanded documentation options for claiming preferential tariff treatment, including self-declarations.

These amendments will come into effect once the Second Protocol enters into force for Australia.

5. Royalty withholding tax dispute to be heard by court

In Oracle Corporation Australia Pty Ltd v Commissioner of Taxation, the Federal Court has refused a temporary stay in a dispute over whether "sublicence fees" under a software distribution agreement are royalties, subject to Australian royalty withholding tax. The taxpayer sought the stay pending the completion of a Mutual Agreement Procedure (MAP) between the Australian and Irish tax authorities. However, the Court ruled in favor of the ATO, citing strong public interest reasons for resolving the issue judicially, thus providing essential guidance for both tax authorities and taxpayers on the application of royalty definitions.

For further information or advice in relation to these updates, get in touch with Becky Nguyen.