There is no question large business is under close scrutiny by the ATO as G20 Summit fever kicks in as politicians from around the globe place a heightened importance on taxation. Base Erosion and Profit Shifting (BEPS) issues have been brought down to the local level, and it’s likely to stay with us for a while. This is evident given the release of the ATO’s most recent Large business bulletin. There are 5 broad areas the ATO will be focusing on across all industries including banking and finance, insurance, and energy, resources and superannuation industries:
Base erosion – working collaborative to implement changes to the domestic and international legislative and administrative frameworks
Profit shifting – looking at tax planning that involved shifting assets, risks and functions to low tax jurisdictions
Cessation of Australian operations – understanding the risks of major manufacturing exits from Australia
Planned Public infrastructure sales and investments – understanding the risks from public infrastructure sales and major investments in infrastructure development
Petroleum resource rent tax starting base – reviewing large starting base returns to identify any systemic risks
Other common threads running through the industries include:
Permanent Establishment (PE) and attribution issues
Thin capitalisation issues, and
Consolidation and Taxation of Financial Arrangements (TOFA) issues.
Research and Development is on the ATO’s radar for the energy and resources industry, including looking at the nature, purpose and timing of the activities conducted. Transfer pricing issues also seem to be emerging in the banking and finance, and energy and resources sectors.
The insurance industry also seems to have more issues on the table, in comparison to other industries, with some looking significant.
Whilst many of the focus areas are not new, it is interesting to observe how the ATO’s aspirations of a ‘lighter touch’ approach in its administration might play out when the ATO is reviewing these risk areas in 2014-15.
We will just have to wait and see.