Our monthly Clarity in financial reporting newsletter informs you of key focus areas in financial reporting for the month: actions, developments, and dates.
Key actions: All Australian listed entities that participated in the JobKeeper scheme, whether or not information has been disclosed in financial reports or elsewhere, must ensure they comply with new legislative requirements to announce prescribed details to the market.
On 2 September 2021, Federal Parliament passed the Treasury Laws Amendment (2021 Measures No. 2) Bill 2021. As part of negotiations, an additional schedule was included in the Bill to require Australian listed entities to announce information to the market about JobKeeper payments. This is effected through a new Division being included in Part 2M.3 of the Corporations Act 2001. The Bill received Royal Assent on 13 September 2021.
All listed entities that have received a JobKeeper payment, including through a subsidiary, must provide an announcement to the market (such as the ASX, Chi X, NSX, etc) of the following details:
Important: The requirement to make an announcement to the market of the above information applies even though the entity may have already disclosed equivalent information in financial reports, previous announcements or other documents.
The effect of the legislation is that the information must be provided for any financial year in which an entity has received a JobKeeper payment. In other words, the legislation requires retrospective disclosure for past financial years in which the entity (or its subsidiaries) received a JobKeeper payment.
The timeline for making the announcement of the information to the market depends upon when the entity lodges its financial report for the relevant financial year:
In addition to being disclosed to the market (ASX etc), the legislation requires ASIC to publish a consolidated report of all such notices given as soon as practicable after they are released to the market by entities. This report is required to be regularly updated.
As part of the passage of the legislation, amendments to the legislation were proposed to require the Tax Commissioner to publish details of JobKeeper payments received by all entities with annual turnover of $10 million or more. These amendments were not successful.
Non-listed entities that are currently finalising their financial reports may wish to consider voluntarily including similar disclosures in those financial reports.
There are some unclear aspects of the requirements that may require clarification by ASIC or others, such as the cut-off for disclosure between financial years. We will provide any further updates in future editions.
Key actions: Entities undertaking research and development (R&D) activities and claiming the available tax incentives need to understand the financial reporting implications of the new R&D tax offset regime which came into effect from 1 July 2021.
A revised R&D tax offset regime, also known as the R&D Tax Incentive (RDTI), has taken effect for income years commencing on or after 1 July 2021.
The R&D tax offset is available as either a refundable or non-refundable tax offset, depending on whether the aggregated turnover of the claimant is less than $20 million (refundable) or $20 million and over (non-refundable). The overall cap on R&D expenditure has been raised to $150 million (from $100 million) and a new ‘R&D intensity’ premium introduced.
For an understanding of the tax aspects of the R&D tax offset, see our Tax Essentials publication Understanding the R&D Tax Incentive Regime.
Accounting for the new regime is expected to be largely consistent with general practice under the prior regime:
The refundable R&D tax offset is generally accounted for as a government grant, with a credit recognised in profit before tax over the period necessary to match the benefit of the credit with the costs for which it is intended to compensate
In contrast, the non-refundable R&D tax offset is generally accounted for as an income tax and a credit recognised within tax expense and a tax asset recorded when the entity satisfies the criteria to receive the credit. In addition, a deferred tax liability is recognised in relation to any related capitalised R&D asset.
The new R&D tax offset has different ‘clawback’ mechanisms for related government grants, ‘feedstock adjustments’ and balancing adjustments from the previous regime, and this may impact accounting policies.
We’ve published an updated Clarity publication, Accounting for the R&D tax offset, which:
Explains how the revised R&D tax offset works in practiceExplores how the R&D tax offset should be accounted for, including the accounting policy options and general practice, deferred tax effects, presentation and disclosure considerations and other mattersOutlines the accounting impacts of the new ‘clawback’ mechanismProvides examples of accounting for the R&D tax offset using various accounting policies, both for refundable and non-refundable R&D tax offsets.
Why does it matter? Ensure you are aware of the latest developments.
A summary of recent developments: