Since 1 July 2023, listed and unlisted public companies that report under Chapter 2M of the Corporations Act 2001 have had to include a consolidated entity disclosure statement (CEDS) in their annual financial reports.

The CEDS is a requirement under s295 of the Corporations Act 2001, being the section that deals with the contents of an annual financial report. Accordingly, the CEDS is included as a separate statement within the annual financial report, positioned after the notes but before the audit report.

As explained in our previous article, the consolidation requirements applicable to a public company determines the extent of the information to be disclosed in the CEDS:

  • Where a public company is required to prepare consolidated financial statements under Australian Accounting Standards (AAS), detailed information about each entity that is part of the consolidated entity is required to be disclosed.
  • Where a public company is not required to prepare consolidated financial statements under AAS, a separate CEDS must still be prepared however it will only contain a statement to this effect.

The detailed disclosures required by public companies required to prepare consolidated financial statements are contained in s295(3A) of the Corporations Act 2001. These have recently been amended, and s295(3B) inserted, to clarify the provisions related to tax residency of subsidiary entities.

Specifically, the amendments clarify that:

  • A subsidiary that is an Australian tax resident under Australian tax law and a foreign resident under the law of one or more foreign jurisdictions must disclose the Australian tax residency and list all foreign jurisdiction tax residencies.
  • No foreign jurisdiction is required to be listed for a subsidiary that is not an Australian tax resident and is established and operates in a foreign jurisdiction that has no corporate tax system (for example, the Cayman Islands).
  • A partnership included in the CEDS as a subsidiary entity will have Australian tax residency if at least one member of the partnership is an Australian tax resident (within the meaning of the Income Tax Assessment Act 1997 (ITAA 1997).
  • A trust included in the CEDS as a subsidiary entity will have Australian tax residency if the trust is a resident trust estate (within the meaning of Division 6 of Part 3 of the ITAA 1936) in relation to the year of income that corresponds to the financial year.

The above amendments will apply in relation to annual financial reports for financial years commencing on or after 1 July 2024 (e.g. for years ending 30 June 2025).

This article was first published in Issue 22 of The Bottom Line.