RSM has urged US-headquartered companies operating in Australia to prepare for public country-by-country reporting requirements, which mark a significant shift in the reporting landscape.

Australia’s public country-by-country (CbC) requirements represent a significant change in the reporting landscape, RSM says. Unlike existing confidential OECD CbC requirements, the new rules will require companies to publicly disclose their country-by-country tax information.

“The most significant difference in this new regime is that the ATO will publish this sensitive financial and tax information, making it readily accessible to the public,” RSM partner Danielle Sherwin wrote in a release.

RSM warned that public disclosures would give competitors and tax authorities in other jurisdictions access to multinationals’ financial and tax information. It urged affected companies to perform a market sensitivity analysis to get a better picture of their reputational and compliance risks ahead of the changes.

To shield companies from sharing sensitive information, the ATO said it would allow for partial exemptions from public disclosure. Detailed exemption information is expected to be released later this year.

Because Australia’s CbC reporting requirements differ from existing OECD requirements, RSM said it would boost the compliance burden on multinationals.

For example, Australia’s CbC rules require multinationals to use data from the consolidated financial statements of their CbC reporting parent, while OECD’s regime allows more flexibility in data sources. RSM said that this would particularly affect US groups, which may not have local requirements for the preparation of consolidated accounts.

In contrast with the OECD system, the filing obligation of Australia’s public CbC reporting regime would fall to the CbC reporting parent and not the Australian taxpayer. Affected groups would need to ensure that they had registered their CbC reporting parent with the ATO when forms become available, RSM said.

Furthermore, financial, tax and headcount data would have to be reported separately for Australia and certain countries specified by the Tax Office, including Singapore, the Cayman Islands and Panama. Data for other jurisdictions could be aggregated.

Under the new laws, multinationals would also be required to include a statement outlining their approach to tax, and explain any discrepancies between their tax bills and the headline tax rate in each jurisdiction they operate in.

Last year, the ATO announced the introduction of public CbC reporting requirements in a bid to boost transparency and combat multinational tax avoidance.

Its 2022–23 corporate tax transparency report showed that 31 per cent of large companies operating in Australia did not pay tax to the ATO. The report gave little information regarding how 1,200 companies in Australia avoided their domestic taxes.

The new public disclosure laws would enable experts to scrutinise companies’ profit-shifting behaviour and boost transparency surrounding tax avoidance schemes.

To prepare for Australia’s CbC reporting requirements, RSM said multinational companies would need to ensure consistency between their confidential OECD reporting and Australia’s incoming public CbC reporting. Penalties for non-compliance could reach $825,000 for filings over six months late.

“US headquartered groups with operations in Australia will need to navigate these changes carefully, balancing the need for compliance with the potential risks of increased transparency,” Sherwin wrote.

“By proactively addressing these challenges, US headquartered groups can mitigate risks and ensure they remain compliant with the new requirements.”