Certain large private companies are required to prepare and lodge a reportable tax position (RTP) schedule for income years beginning on or after 1 July 2021 if they meet the RTP schedule lodgment criteria.
This is in addition to the expansion of the RTP schedule to private companies that have previously been notified of their requirement to lodge for the income year starting on or after 1 July 2020.
What are the lodgment criteria?
Private companies are required to lodge an RTP schedule if they are:
- lodging a company tax return for the entire year (12 months or more); and
- have total business income of either:
- $250 million or more; or
- $25 million or more and are part of an economic group with total business income of $250 million or more.
Total business income is the amount reported at label 6S (Total income) of the company tax return. No equivalent label exists for trusts and partnerships and so income testing must be performed manually for those entities that are part of the company’s economic group. Australian income of foreign group members and foreign income of Australian group members are included but the income of individuals is not counted for these purposes.
The concept of an “economic group” is not defined in the tax law but is based on majority controlling interests. Refer to the ATO’s definition (click here) for determining membership of an economic group.
Note that some private companies may receive letters from the ATO encouraging them to consider the RTP schedule requirements for the 2021-22 income year. However, to be clear, all private companies, regardless of whether a letter was received, are required to self-assess their requirement to lodge a 2021-22 RTP schedule.
Substituted accounting period
Private companies who are ”early December balancers” with an income year that begins on 1 January 2020 and ends on 31 December 2020 in lieu of the 1 July 2020 to 30 June 2021 financial year are only required to lodge an RTP schedule for the 2021-22 income year if they have been notified by the ATO. Thus, such private companies are only required to start self-assessing their requirement to lodge an RTP schedule for the 2022-23 and later income years.
In line with the ATO’s published views on tax governance, there is an expectation that large private groups will have processes in place to ensure that company’s management and their board of directors are aware of positions that fall outside the ATO’s guidance. These processes are key to identifying disclosures required on the RTP schedule.
What are the next steps?
It is critical that private companies from an early stage consider whether they are likely to meet the RTP schedule lodgment criteria, and if so, assess existing tax governance processes and determine what disclosures may be required. Companies that meet the lodgment criteria should ensure that tax governance processes are in place to enable them to most efficiently comply with their obligations in respect of the RTP schedule from 1 July 2021.
Despite lodgment of the RTP schedule for self-assessment companies not being due until after 30 June 2022, it is prudent that clients start to engage in this process as early as possible.
For more information or to determine how this may apply to you, contact a Pitcher Partners representative.