The Reportable Tax Position schedule was first introduced in 2012 as a way for the ATO to keep an eye on contestable or material tax positions taken by public and multinational companies. Its recent proposal to expand the schedule to large private companies and corporate tax groups has experienced pushback from various stakeholders. As a result, the ATO is now consulting with industry groups and advisers to co-design the schedule with a view to implement it in 2020-21 financial year.
The expansion of the Reportable Tax Position (RTP) schedule to large private companies and corporate tax groups have been shelved by the Tax Office until the 2020-21 financial year (ie 1 July 2020) amid pushback from various stakeholders over the lack of clarity surrounding its practical implementation. The ATO notes it is now working with industry groups and advisers from the private groups market to co-design the RTP schedule for implementation.
The RTP schedule was first introduced in 2012 and only applied to the top 100 public and multinational companies. By 2018, it had been expanded to all public and multinational companies with a total business income exceeding $25m that are part of an economic group with total business income of greater than $250m.
The actual schedule is designed to provide a mechanism for taxpayers to disclose their most contestable and material tax positions to the ATO and inform it about areas of tax law that may require further clarification or certainty.
According to the ATO, the schedule allows it to tailor its engagement and work with the companies or groups on complex high-risk arrangements and to better understand the tax risks for those taxpayers. Conversely, it also allows the companies or groups involved to make informed decisions about their tax positions or potential tax positions that are considered to be high risk arrangements.
The specific types of disclosures required by the schedule is divided into 3 categories:
- Category A: tax uncertainty reflected in the taxpayer's income tax return – where a position that is argued is about likely to be correct as incorrect, or less likely to be correct than incorrect (similar to reasonably arguable position which applies generally to all taxpayers).
- Category B: tax uncertainty reflected in financial statements – where uncertainty about taxes payable or recoverable is recognised/disclosed in the taxpayer or related party's financial statements.
- Category C: specific risks and issues – based on public advice and guidance including Taxpayer Alerts, practical compliance guidelines and observations in compliance products.
Considering the advantage of early intervention for risky arrangements, it is clear to see why the ATO would want to apply the schedule to as many companies or groups as possible, whether they be private or public. As initially proposed, the RTP schedule expansion would've applied to all companies with a total business income exceeding $25m that are part of an economic group with total business income of greater than $250m. It would've included standalone companies with total business income in excess of $250m and would not have included trusts or individuals.
Therefore, the expansion would've been aligned with the requirements for public and multinational companies, and according to the ATO, create a level playing field among large corporate groups by ensuring all large businesses have the same obligation to disclose their most contestable and material tax positions, regardless of whether they are public or private. The ATO may eventually have ambitions to slowly expand the RTP schedule to all entities or lower the income threshold, but for now, it only impacts the very large end of town.
How does this affect me?
If you're involved in a large private company or corporate group, we can help you work out whether you'll need to lodge RTP schedules going forward. If you're a smaller company or an individual and have taken an uncertain position in your tax return, we can help you figure out whether that position is reasonably arguable. Contact us today.
