Australia: An overview of recent tax developments in Australia

Matthew Cridland

One of the major items of recent Australian tax news has been the increasing efforts of the Australian Taxation Office (ATO) to investigate taxpayers named in the Panama Papers. Other developments have included a recent decision by the Administrative Appeal Tribunal (AAT) regarding input tax credit (GST credit) entitlements for GST incurred on retirement village development costs. A tax Bill has also been introduced by the recently re-elected government, led by Prime Minister Malcolm Turnbull, which will implement the new Germany/Australia double tax treaty once enacted. The ATO has also published its 2016-17 corporate tax plan. Meanwhile, the Board of Tax is continuing to focus on companies signing up to the Tax Transparency Code.

The Serious Financial Crime Taskforce (SCFT) undertook a "week of action" in response to the Panama Papers. More than 100 taxpayers were contacted and informed that they are subject to compliance action.

The week of action included a focus on six accountants and up to 60 of their clients. The ATO indicated that it has built a profile of more than 1,000 Australian taxpayers identified in the Panama Papers, although it noted that simply being named in the Panama Papers is not necessarily an indication that a taxpayer has done anything wrong.

The AAT has affirmed the objection of the ATO regarding the ability for a taxpayer to claim input tax credits on 91% of the cost of acquisitions for the Stage 1 construction of a retirement village (Re RSPG and FCT [2016] AATA 687).

The issue was whether developers could claim back the GST on development costs, as they do in traditional housing. In retirement village developments, the credits are not available to the same extent because the accommodation units are not sold, as in traditional housing, but are leased or licensed.

The International Tax Agreements Amendment Bill was introduced into parliament on September 1 2016. Once enacted, the International Tax Agreements Act 1953 will be amended to give effect to the double tax agreement between Australia and Germany signed in November 2015. The existing 1972 treaty will be replaced by the new treaty.

The new German treaty is the first Australian treaty to include integrity measures arising from the G20/OECD BEPS Project. It includes measures to protect against treaty shopping and the use of conduit vehicles to exploit treaty benefits. The new treaty also includes measures to facilitate the sharing of taxpayer information between German and Australian tax authorities and measures relating to mutual assistance on the recovery of tax debts.

The benefits of the new treaty include reduced Australian withholding tax rates, together with benefits for income received by Australian managed investment trusts and certain German collective investment vehicles.

The recently released ATO Corporate Plan for 2016-17, which will operate from 2016-17 until 2019-20 has set out the key focus areas of the ATO, which have been described as a desire to "deliver better taxpayer experience". The key aspects of this plan include the tailoring of ATO communications to individual taxpayers, attempting to strengthen the relationship with tax and superannuation professionals and establishing the Tax Avoidance Taskforce in collaboration with the Treasury Department. The taskforce will aim to improve the ATO's ability to address corporate tax avoidance.

Medium and large businesses are being encouraged to continue to sign up to the voluntary tax transparency code, which is a minimum standard of public disclosure for tax information.

While there is no prescribed timing for publishing a tax transparency code report yet, once a report has been published a company can notify the ATO of its compliance with the code. The company can also subsequently be listed on the public register of reporting companies which is maintained by the Board of Taxation.

Matthew Cridland (matthew.cridland@dlapiper.com)

DLA Piper Australia

Tel: +61 2 9286 8202

Website: www.dlapiper.com