The Australian Taxation Office (ATO) released a notice announcing changes to the Country-by-Country (CbC) Local file reporting on Wednesday, 1 May 2024. These changes will take effect starting 1 January 2025.

The key points of the notice include:

SF reporting is used to detect higher risk international tax structuring and profit-shifting arrangements.

The current design of the short form (SF) requires CbCREs to disclose information about their Australian entities and operations in an LCMSF attachment. This approach, however, is not delivering a sufficient level of information for SF reporting.

The current design of the SF as an LCMSF attachment results in:

  • inconsistent reporting content
  • inconsistent reporting format or structure
  • incomplete information in some reports not satisfying the level of reporting required in the SF instructions.

When reporting changes apply

V 4.0 will apply to statements lodged from 1 January 2025 relating to reporting periods starting on or after 1 January 2024. Statements relating to reporting periods starting before 1 January 2024 may continue to lodge using LCMSF Schema Version 3.0 (V 3.0), though ATO encourages the use of V 4.0 for all reporting periods. V 3.0 is expected to be deactivated for all reporting periods on 1 January 2026.

Why reporting is changing

LCMSF Schema Version 4.0 is expected to:

  • Simplify reporting requirements for the majority of CbCREs that don’t have:
    • personnel reporting overseas
    • restructures (including changes in related party financing)
    • new intangibles arrangements.
  • Increase reporting efficiency through combined MST reporting fields covering both:
    • restructures
    • new intangibles arrangements.
  • Enable the use of structured SF reporting data in ATO analysis and risk detection.
  • Reduce the need for the ATO to identify and follow up incomplete information.
  • Reduce the ability to avoid the required level of SF reporting.
  • Include minor adjustments to existing validation rules for the full local file.
  • Move the fields for attaching financial accounts to clarify that financial accounts can separately be lodged with the SF section and do not have to be lodged with Local File – Part B.