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The broadening of Significant Global Entity definition

Tax Insights

Broadening of Significant Global Entity definition and the potential impact for Australian entities with Private Equity ownership.

Following new legislation which received Royal Assent on 25 May 2020, the definition of Significant Global Entity (SGE) has been expanded, and a new definition of Country-by-Country Reporting (CbCR) entity created, broadly for income years starting on or after 1 July 2019.


This will particularly impact Australian entities which are owned by private equity and certain privately-owned groups.


Australian entities with foreign ownership by shareholders that may derive revenues in excess of A$1 billion (which are not already classed as SGEs) should carefully consider whether they become a SGE as a result of these changes – even if they are themselves small entities.

This is because the SGE rules create additioThe definition changes to Significant Global Entity will particularly impact Australian entities which are owned by private equity.nal obligations, which are reinforced by draconian late lodgment penalties, which start at A$105,000 for any relevant tax filing which is lodged 1 day late, ramping up to A$525,000 where the lodgment is more than 112 days late. The Australian Taxation Office (ATO) is actively issuing these penalties to delinquent taxpayers.


Significant Global Entity: History

The concept of a SGE was first introduced in Australia in 2015 with an aim to increase transparency of multinational groups. There were several rules targeted solely at the SGE group, including CbCR requirements as well as the submission of General Purpose Financial Statements (GPFS) which are made available to the public via the Australian Securities and Investment Commission (ASIC). As noted above, these are overlaid by a harsh late lodgment penalty regime.

However, over the last few years it is apparent that the SGE definition was not expansive enough to capture all of the Australian taxpayers expected to be brought into the SGE regime. As such, the Australian Government has been trying to pass legislation to expand the definition of a SGE for a number of years.The concept of a Significant Global Entity was first introduced in Australia in 2015.

These new provisions in Treasury Laws Amendment (2020 Measures No. 1) Bill 2020 (the Bill) are applicable for income years starting on or after 1 July 2019, but with potentially different start dates for CbCR obligations and the late lodgment penalties.

Under the previous definition of a SGE, the accounting principles actually applied by the parent company were very important and the tax definition tied more to accounting concepts than tax law. This led to a number of issues for the ATO, including entities excluded from the SGE regime on the basis of materiality in the global group, investment entities or private equity investment applying different accounting principles which could exclude subsidiaries from falling within the SGE status.


New Changes

The scope of the rules is expanded by introducing the concept of a notional listed company group – a group of entities that would be required to consolidate for accounting purposes as a single group under the applicable accounting rules if...

Continue reading the full changes below.

Read the full report on broadening of Significant Global Entity definition.

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