Free Fair Taxation Report Example
The task aim sat three major issues. The first issue entails the illustration of the present disclosure requirements as applicable to the AASB 112. The present disclosure agreement adequately describes the ATO taxable income, and also ATO income tax payable. The two tax levels are now legally required to be disclosed publicly. The second issue entails income tax information, which is disclosed by the company financial report of the last financial period. Australian legislator strongly supports the requirements for extra ATO disclosures. The third issue entails illustrating a suitable illustration of a corporation that presently shows tax information that is more than the AASB 112 concepts. The paper will also illustrate recommendations of how the identified company can realize the extra ATO disclosures (ATO 2015).
AASB 112 Disclosure Requirements
The compiled SAASB Standard illustrates the AASB 112. The section of the compilation that will be analyzed entails the financial reporting standards for the profit making corporations. The report focuses on the financial period that starts on or after July 1, 2013, and before January 1, 2014. The standard also accepts early utilization of the financial reporting system. AASB integrates entire earlier amendments done up to December 18, 2012. AASB 112 Income Taxes integrates IAS 12 Income Taxes in the form that is illustrated through the International Accounting Standards Board (IASB). The major objective of the standard is to illustrate accounting practices in relation to income taxes. Two aspects of this objective are illustrated. The first aspect entails future recovery of carrying amounts which are recognized in the financial position statements. The second aspect involves the transactions of the present financial period which are recognized in the accounting statements. It is significant to recognize the assets and liabilities expected to be recovered, and also settle carrying amounts in relation to the particular asset and liability (Ting 2014).
The standard is utilized in the accounting of the income taxes of the corporations. The income taxes comprise both domestic taxes and the foreign taxes that are taxable profits. In addition, income taxes involve taxes like withholding taxes, that are payable through subsidiary and joint arrangement. For public corporations, income taxes additionally involve income tax payable through the public sector entity based on their legislation. These income tax categories are known as the income tax equivalents. This standard does not handle the accounting methods applicable to the government grants, not-for-profit corporations, and the investment tax credits (Organization for Economic Co-operation and Development 2015).
The accounting profit entails the profit or the loss that is realized in the trading period, before the removal of the tax expense. The current tax involves the total amount of the recoverable or the income tax payable, as a result of taxable profit or tax loss realized in that trading period. The deferred tax assets illustrate the level of income taxes, which are recoverable during the future periods in relation to; the deductable temporary differences, carry forward applicable to the unused tax losses, and the carry forward applicable to the unused tax credits (OECD 2015).
Need for the Extra ATO Disclosures
The company that is analyzed in the paper is the BHP Billiton. The company earned 2014 revenue of $67.2 billion. The profit made during the year by the company was recorded as $15.2 billion. The voluntary disclosure is thus necessary, and it is conducted to ensure additional information is provided to ATO to enhance tax obligations. The disclosures are aimed at three issues; omission, mistake and error. These issues are usually experienced in the tax information as provided by ATO. The disclosures are normally considered voluntary, if they are made without the request by ATO. BHP Billiton normally engages in voluntary disclosures, after the announcement of the financial period results. Voluntary disclosures are applied through various approaches. The approaches are; writing, phone calls, electronic, or other appropriate avenues (Organisation for Economic Co-operation and Development 2015).
The voluntary disclosure is very significant in the financial systems of the country. The probability of experiencing tax related charges are increasing. This is because ATO continuously enhances its operation in the over-claimed entitlements, under-reported, and even the omitted information. But presently, the ATO has illustrated enhanced interests towards collaborating with the taxpayers like BHP Billiton who make additional efforts in putting their tax affairs in an orderly manner (ATO 2015). Organizations that possess offshore income and assets like BHP Billiton must adequately review their offshore activities, so as to put their tax records in order. The Project DO IT, adequately discloses the income generated from the overseas investments with adequate chance of providing voluntary disclosures as applicable to the ATO. The voluntary disclosure period lasted up to December 19, 2014. BHP Billiton adequately complied with the directive and thus benefited from the tax disclosure processes. The sources of offshore transactions include; accounts like debit and credit transactions, the financial investments, the tax processes, and finally the organizational entities like partnerships and trusts. ATO is increasingly adopting effective systems that adequately identify the foreign income sources.
Recommendation to Additional ATO Disclosures
The project DO IT was initiated on March 27, 2014, with the main aim of transparently disclosing the offshore income. It enables the eligible taxpayers to voluntarily give information on income and also the assets, The recommendations for extra ATO disclosures is based on the concepts illustrated in the project DO IT. The company is encouraged to come forward and disclose transparently the offshore assets. The company should also collaborate with ATO to discuss the disclosure arrangements. VTO caters for this arrangement under the standard disclosure processes (ATO 2015). The disclosure arrangement provides adequate opportunities for negotiating an appropriate arrangement, based on the applicable standards. All taxpayers qualify for making arrangements based on the set ATO procedures. Assurances are adequately provided to the company, to benefit by properly participating in the Project DO IT. The company is thus required to give appropriate financial information to the ATO, so as to benefit from the package. To adequately receive the benefits of ATO under the Project DO IT, the company is required to provide truthful information in the disclosure statement. The company will be contacted within 28 days, concerning the eligibility and the qualification communication. The company presently understands that it qualifies or is eligible for the disclosure arrangements managed by the project DO IT, and the exclusions which adequately applies.
Australian Taxation Office 2015, Tax secrecy and transparency: administrative arrangements for reporting entity information - ATO consultation paper March 2015, Australian Taxation Office, ACT, viewed 24 March 2015, <https://www.ato.gov.au/General/Consultation/What-we-are-consultingabout/Papers-for- comment/Tax-secrecy-and-transparency--administrative arrangements-for-reporting- entity-information---consultation-paper-March-2015/#>.
Organisation for Economic Co-operation and Development 2015, Base Erosion and Profit Shifting, Organisation for Economic Co-operation and Development, France, viewed 24 March 2015, <http://www.oecd.org/ctp/beps.htm>.
Ting, A 2014, 'Information is power: OECD tax plan puts Apple and Google on notice', The Conversation, 17 September, viewed 24 March 2015, <http://theconversation.com/information-is-power-oecd-tax-plan-puts-apple-andgoogle- on-notice-31472>.
OECD - Organization for Economic Co-operation and Development 2015