Voluntary Tax Transparency Report FY2018

Voluntary Tax Transparency Report.

FY 2018.

In this document you’ll find detailed information about Frasers Property Australia’s tax affairs including our attitude towards managing tax, our tax governance processes and how much tax we paid during the year ended 30 September 2018.

About Frasers Property Australia Frasers Property Australia (FPA) is a diversified property group, active in residential, retail, commercial and industrial property, right across the country. We began developing property in Australia in 1924, and today we’re part of the global Frasers Property Group, a multi-national company that develops, owns and manages a diverse, integrated portfolio of properties. Listed on the Main Board of the Singapore Exchange Securities Trading Limited (SGX-ST) and headquartered in Singapore, the Group has total assets of approximately S$32 billion as at 30 September 2018.

Frasers Property’s assets range from residential, retail, commercial and business parks, to logistics and industrial in Singapore, Australia, Europe, China and Southeast Asia. Its well-established hospitality business owns and / or operates serviced apartments and hotels in over 80 cities across Asia, Australia, Europe, the Middle East and Africa. Frasers Property is also the sponsor of three real estate investment trusts and one stapled trust listed on the SGX-ST. Frasers Centrepoint Trust, Frasers Commercial Trust, and Frasers Logistics & Industrial Trust are focused on retail, commercial, and logistics and industrial properties respectively. Frasers Hospitality Trust (comprising Frasers Hospitality Real Estate Investment Trust and Frasers Hospitality Business Trust) is a stapled trust focused on hospitality properties.

In Australia and across the globe, we believe experience matters, and that puts our customers at the heart of our business.

Our contribution to the Australian economy Frasers Property Australia company has over 90 years’ heritage in Australia with activities covering the development of residential land, housing and apartments, commercial, retail and industrial properties, investment property ownership and management, and property management. Our origins date back to 1924 with the inception of T. M. Burke Pty Ltd, which later commenced trading under Australian Housing and Land and Australand. Australand was acquired by Frasers Property Limited in 2014, adopting the global Frasers Property brand in August 2015. Today, Frasers Property Australia employs over 650 staff, with our head office in Sydney and offices in Melbourne, Brisbane and Perth.

In our long history in Australia, we’ve delivered over 135,000 homes.

This year, we’ve delivered 12 industrial and commercial facilities, and settled another 3,040 homes/lots. We will be also deliver and manage four shopping centres in the next 18 months and have 17,000+ homes in our residential pipeline.

Sustainability is at the heart of our operations. The company creates places where resources are re-used, recycled and restored. It fosters new ideas to support people and the planet, and undertakes tangible initiatives to help people lead happier, healthier lives.

Tax risk appetite & tolerance The Risk Appetite & Tolerance Statement is a Statement endorsed by the Board and sets out the level of risk (including tax risk) which the group is prepared to accept. Overall, the statement provides that the group has no tolerance for a material tax risk.

The Board is also committed to ensuring that any non-routine transactions or arrangements undertaken by the group will be: Not tax driven and supported by genuine commercial activity.

Supported by a reasonably arguable position where it is unclear how tax legislation would apply.

Assessed in terms of the likelihood of contravening any tax anti-avoidance rules.

The Board also has no tolerance for transfer pricing benefits to arise in respect of significant international related party dealings with any other Frasers Property group entities.

Tax governance Our Board Tax Governance Policy sets out our tax strategy as follows: To comply with all State and Federal tax obligations and pay or account for the correct amount of tax.

To ensure that the FPA tax positions adopted are consistent with what the FPA Directors authorised or believe is prudent.

To assess tax effective opportunities but ensure they are in line with the commercial objectives of the business and within the boundaries outlined in our Risk Appetite & Tolerance Statement.

To foster good relationships with State and Federal tax authorities through proactive management of FPA’s tax affairs in ‘real time’ (where possible).

To collaborate with our related parties in relation to international reporting obligations.

Tax risk management The Board is also committed to the identification, assessment, monitoring and management of risks across the organisation, this process includes tax risk as one of the elements. The overall risk management process is governed by the Risk Management Policy and specific to tax, senior management developed the Tax Risk Management Procedure.

FPA’s tax risk management and governance is depicted in the following diagram:

Group Risk Appetite & Tolerance

Board level

Board level

Tax Governance Policy

CEO/CFO

Tax Governance Procedure

GM Tax

Tax Risk Management

Roles & Responsibilities

Risk Management Policy

Other

Engagement with the ATO Consistent with FPA’s Tax Governance Procedure, we seek to engage with the Australian Taxation Office (ATO) on a ‘real time’ basis by actively engaging and being transparent.

During FY 2018 the ATO commenced an Income Tax Top 1000 Streamlined Assurance Review (SAR) of Frasers Property Australia Pty Limited (FPAPL) for the 2014 to 2017 income years. The purpose of this review was to obtain greater confidence that FPAPL paid the right amount of income tax and to identify areas of risk in respect of the income years reviewed. The ATO SAR is anticipated to be completed during FY 2019.

International related party dealings FPA is part of a global group. Our related party dealings predominantly comprise of financing arrangements and transactions with our Hong Kong subsidiary used to market and sell our properties.

During FY 2018 FPA sold interests in AUD $78.3 million of income producing real estate assets to FLT Australia Trust (FLT) which is part of Frasers Logistics and Industrial Trust – a Singaporean Real Estate Investment Trust (REIT) listed on the Main Board of the Singapore Stock Exchange (SGX). The FLT portfolio sale was negotiated on an arm’s-length basis with reference to independent valuations.

All international related party dealings between FPA and its overseas related parties are risk assessed in accordance with the internationally recognised ‘arm’s-length principle’ and in compliance with Australian transfer pricing laws supported by contemporaneous transfer pricing documentation.

The FPA group filed Country-by-Country (CbC) reports for FY 2018. CbC reporting is part of a wide range of international measures aimed at combating tax avoidance through more comprehensive exchanges of tax information between countries.

Effective tax rate The FPAPL and Frasers Property (FPA) Pty Limited (FFPA) tax consolidated groups comprise the majority of the entities in the FPA group. Both of these consolidated groups prepare consolidated financial account information in accordance with standards issued by the Australian Accounting Standards Board (AASB) and are audited annually by an external independent auditor.

A high level summary of FPAPL and FFPA FY 2018 tax results is presented below: FPAPL $m

FFPA $m

A. Total Income

1,309.0

308.7

B. Total Expenses

(1,010.2)

(259.8)

C. Accounting Profit

298.8

48.9

Add/Less: Adjustments required under Australian tax laws

(193.6)

(22.8)

Permanent Differences Other

0.5 —

Temporary Differences Depreciation Net Property Dealings Other Utilisation of carried forward tax losses

(25.4) — (63.0) (24.3) (7.9) 1.5 (90.3) —

D. Taxable Income/(Loss)

105.3

26.1

E. Tax Payable @ 30%

31.6

7.8

Effective Tax Rate – Note 1 below

10.6%

15.9%

Note 1: FPA’s Effective Tax Rates (ETR) The ETR is calculated in respect of tax payable (E) which relates to corporate taxes divided by accounting profit (C).

In FY 2018, FPAPL derived an accounting profit of $298.8 million (C), however had taxable income of $105.3 million (D).

The difference between the accounting profit and taxable income is predominately due to the temporary differences as a result of the capitalised inventory deductions, investment properties depreciation expense and reversal of the fair value revaluation gains/(losses). These timing differences resulted in an ETR of 19.6% before the utilisation of the prior year carried forward tax and a ETR of 10.6% following utilisation of the prior year carried forward tax losses. The FPAPL timing differences are as a result of differing tax treatment between AASB and Income Tax legislation (ITAA). The inventory and investment property timing differences will reverse during settlement of the respective project or following disposal of the individual investment property and, accordingly a deferred tax balance has been booked in relation to these timing differences.

In FY 2018, FFPA derived an accounting profit of $48.9 million (C) however had a taxable income of $26.1 million (D). The difference between the accounting profit and taxable income is predominately due to the inventory timing differences, which resulted in an ETR of 15.9%. The FFPA timing differences are as a result of differing tax treatment between the AASB and the ITAA. The inventory timing differences will reverse during the project settlement phase for the respective projects, and accordingly a deferred tax balance has been booked in relation to these timing differences.

Total taxes paid During FY 2018 the FPA paid $148.6 million in various taxes and levies in Australia at the State and Federal level.

A summary of the taxes paid is summarised below: Taxes Paid

$m

Corporate Taxes (refer to Note 1 below)

39.5

Employment Taxes (refer to Note 2 below)

55.4

State Taxes (refer to Note 3 below)

28.7

Net Goods & Services Tax (refer to Note 4 below)

19.5

Council Rates (refer to Note 5 below)

5.5

Total Taxes Paid

148.6

ote 1: Corporate Taxes N Corporate taxes in Australia are paid by companies on ‘taxable profits’ at the rate of 30%. The term ‘taxable profits’ refers to the accounting profit (i.e. total income less expenses) adjusted in accordance with the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997 to arrive at the ‘taxable income’ that is taxed at the corporate rate of 30% (i.e. ‘income tax’). This amount represents the Australian group’s payments made in respect of the financial year from 1 October 2017 to 30 September 2018. This figure also includes withholding tax paid (additional to the tax paid on company tax profits). ote 2: Employment Taxes N Employment taxes include Payroll Tax, Pay-As-You-Go withholding, superannuation guarantee and Fringe Benefits Tax payments made by FPA on behalf of employees. ote 3: State Taxes N State taxes include Land Tax, Stamp Duty and Car Park Levies payable by FPA in each Australian State. ote 4: Net Goods & Services Tax (GST) N The GST figure shown is the net GST amount paid by FPA. Net GST amount represents the GST collected on outputs (i.e. sales) less GST claimed on expenses.

Note 5: Council Rates Council Rates are local government charges payable by FPA in respect of each development held around Australia.

Ed.Square, NSW

If you require further information, please contact Frasers Property Australia Corporate Communications: Lisa McCutchion General Manager - Innovation Communication & Sustainability Tel: +61 2 9767 2000 lisa.mccutchion@frasersproperty.com.au

Cover image: Fairwater, NSW