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Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

Your partners for Business Service and Advisory, Taxation, Audit, Business Valuation, Forensic Accounting, Fraud & Risk and Business Valuation Services.

Whatever your business, industry or family office, from local or international institutions we bring extensive expertise.

We're one team with a purpose and passion for what we do. Learn about our culture and career opportunities available to you.

Uncovering insights, trends and inspiration to help business grow in an ever-changing world.

We are always looking for ways to engage and give back to our community.

Telephone: +612 9283 1666
Email: admin@esvgroup.com.au

Level 13, 68 York Street,
Sydney NSW 2000

Why us

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

What we do

Your partners for Business Service and Advisory, Taxation, Audit, Business Valuation, Forensic Accounting, Fraud & Risk and Business Valuation Services.

Who do we help

Whatever your business, industry or family office, from local or international institutions we bring extensive expertise.

Work with us

We're one team with a purpose and passion for what we do. Learn about our culture and career opportunities available to you.

What we think

Uncovering insights, trends and inspiration to help business grow in an ever-changing world.

Working to give back

We are always looking for ways to engage and give back to our community.

Contact us

Telephone: +612 9283 1666
Email: admin@esvgroup.com.au

Level 13, 68 York Street,
Sydney NSW 2000

Significant Global Entities

23 February 2021

by David Prichard

The penalty regime expands

As part of the ATO’s push on bringing compliance activities of the “large end of town” up to date, there has been a change to how the penalty regime applies to Significant Global Entities (“SGE”) in respect of the late or non-lodgement of tax forms.

The changes in the application of the penalty regime result in subsidiary members of tax consolidated and / or multiple entry consolidated groups becoming liable for penalties at the SGE rates.  The changes to the legislation commenced on 1 July 2020 but are effective from 5 December 2019 (ie they have retrospective effect in application).

An SGE is, broadly, an entity that has an annual global income of A$1 billion or more or is a member of a group of entities, consolidated for accounting purposes, that has an annual global income of A$1 billion or more.  Importantly, a very small company in Australia can be classified as an SGE if it is owned by a large multi-national.  As such, its not just the big end of town in Australian terms that these changes can impact.

The penalties for SGE’s are significantly larger than other taxpayers as outlined in the tables below for false or misleading statements or Failure to Lodge (“FTL”) penalties.  The penalty levels can be summarised as follows:

  • False or misleading Statements
Increases for false or misleading statements that do not result in a shortfall amount
Penalty Units Rate from 1 July 2020
No Reasonable Care 40 penalty units ($8,880)
Recklessness 80 penalty units ($17,760)
Intentional Disregard 120 penalty units ($26,640)
  • Failure to lodge (FTL)
Failure To Lodge penalties
Days late SGE penalties
28 or less $111,000
29 to 56 $222,000
57 to 84 $333,000
85 to 112 $444,000
More than 112 $555,000

 

FTL penalties not only apply to income tax returns but can also apply to

  • Business and Instalment Activity Statements
  • Income Tax Returns
  • FBT returns
  • CbC reporting statements
  • Single Touch Payroll
  • General Purpose Financial Statements (GPFS)

It needs to be remembered that if there are multiple lodgements that are overdue or lodged late then multiple penalties will be applied by the ATO.  For example, lodging two BAS’s less than 1 month late will result in a $222,000 penalty. The penalties are sizeable and are imposed without consideration for the size of the Australian operation.

Given the increased scope of the penalty regime to subsidiaries of groups and the wide potential application of a form (e.g. GPFS), ensuring not only accuracy, but also timeliness is fundamental in managing the taxation affairs of the entity.

Ensuring compliance and reporting activities are dealt with on a timely and accurate basis are a fundamental building block of the activities of a company and should be encapsulated within the company’s tax governance policy. Deployment of the governance policy should be supplemented by way of external cyclical reviews in respect of the various activities undertaken.

If you have any questions about reviewing the processes or policies adopted in respect of the completion of the lodgements required, tax positions taken or the development and implementation of a tax governance policy including cyclical reviews please contact your ESV engagement partner.