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A round up of key taxation developments over the month of May from our tax team.
The Australian Taxation Office has publicly announced that it will review stapled structures (which are commonly used, especially in property structures and private equity investment structures). Widely held real estate investment trusts with third party tenants are safe for the moment.
See Tax Update - Stapled Structures dated 17 February 2017 by Deborah Johns, Muhunthan Kanagaratnam, Adam Laura and Chris Merjane for further details.
After 6 months of the so-called foreign resident capital gains tax withholding rules, companies undertaking public market transactions face uncertainty in their obligations in schemes of arrangement and on-market takeovers. A recent G+T Tax Update provides a guide to practically dealing with some, but by no means all, of the uncertainty in these transactions.
See Tax Update - Foreign Resident CGT Withholding Tax dated 17 February 2017 by Tim Gordon, Muhunthan Kanagaratnam and Chris Merjane for further details.
The new Bills introduce anti-avoidance measures to ensure that tax paid by significant multinational entities properly reflects the economic substance of their activities in Australia and prevent multinationals shifting profits made in Australia offshore to avoid paying Australian tax.
The Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017 and Diverted Profits Tax Bill 2017) implement the new diverted profits tax (DPT) announced in the 2016-2017 budget. The DPT arms the ATO with additional powers under the general anti-avoidance rule to deal with multinationals who enter into arrangements to divert their Australian profits to offshore related parties in low tax jurisdictions in order to avoid paying Australian tax, and puts the onus of disproof onto the taxpayer.
Broadly, the DPT:
Under current draft legislation, we note that any jurisdiction with an effective tax rate of lower than 24% may be captured under the DPT.
The DPT demonstrates the Government’s willingness to take unilateral action in order to protect the Australian tax base outside of the BEPS initiative. We recommend all large groups (of greater than $1 billion global turnover and $25 million Australian income) seek advice regarding their corporate structures and tax affairs.
The Bills also introduce two further measures to combat multinational tax avoidance: