Australia: Hockey announces 2015-2016 Budget

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Australia: Hockey announces 2015-2016 Budget

mccormack.jpg

Jock McCormack

The Australian Government released a measured but significant 2015-2016 Federal Budget on May 12 2015. The three main tax changes include a focus on multinational tax avoidance by introducing new targeted non-resident anti-avoidance measures and penalties, changing the goods and services tax (GST) to apply to intangible supplies made by non-residents (including digital content) and tax concessions for small businesses. The Budget continues the Australian Government's focus on certain foreign-based multinationals, after the Australian Senate's inquiry focussed on the Australian tax positions of leading global e-commerce companies.

As a significant integrity measure to protect Australia's revenue base, draft legislation has been released outlining anti-avoidance rules combatting multinational tax avoidance.

Under the proposed section 177DA of Part IVA of the Income Tax Assessment Act 1936, tax benefits will be cancelled in respect of schemes that satisfy all of the following requirements:

Under, or in connection with, the scheme

  • goods or services are provided by a non-resident to an Australian resident who is not an associate of the non-resident;

  • income derived by the non-resident from the supply is not attributable to an Australian permanent establishment (PE);

  • activities are undertaken in Australia by an Australian resident, or through an Australian PE of an associate of the non-resident or who is commercially dependent on the non-resident, in connection with the supply;

Scheme designed to avoid PE income

  • it would be reasonable to conclude that the scheme is designed to avoid the non-resident deriving income attributable to an Australian PE;

Double principal purpose test

  • a person or persons who entered into or carried out the scheme did so for a principal (as opposed to a sole or dominant) purpose of enabling a taxpayer to obtain an Australian tax benefit (that is, an Australian income tax saving) and to reduce foreign taxes or secure a saving from other Australian taxes (for example, GST);

Global revenue threshold

  • annual global revenue of the non-resident in the relevant income year exceeds $1 billion; and

No or low corporate tax jurisdiction

  • the non-resident is connected with a no or low corporate tax jurisdiction.

Other measures to tighten the rules for multinationals include adopting stronger penalties for groups that enter into tax avoidance measures related to profit shifting, and applying new transfer pricing documentation standards from January 1 2016.

The Budget confirms the GST rules are to be extended to the importations of digital products and services. This so called 'Netflix' tax is designed to ensure that non-resident suppliers of such content pay GST, thereby levelling the playing field for Australian suppliers already subject to GST. This measure is consistent with the OECD's guidelines on this subject, but under Australia's laws will require the approval of all states and territories to be enacted.

Jock McCormack (jock.mccormack@dlapiper.com)

DLA Piper

Tel: +61 2 9286 8253

Website: www.dlapiper.com

more across site & shared bottom lb ros

More from across our site

If the Reform leader becomes UK prime minister then he may follow the direction of the US in at least one significant way
Trump declared a new national emergency in issuing the order; in other news, Grant Thornton Germany is up for sale and the subject of interest from both its UK and US counterparts
The judgment, which saw Denmark's Supreme Court rely on OECD TP guidance, sets aside more than 15 years of consistent administrative practice, experts have told ITR
Belgium’s new coalition government has gone ahead with a new exit tax regime that could land it in the courts
Brazil’s government has not officially framed the bill as a countermeasure amid trade tensions with the US, but the move is being considered as part of Brazil’s strategic response, one expert tells ITR
Understanding India’s income tax landscape can help charities ensure compliance, optimise tax benefits, and enhance their impact, writes Raghav Bajaj of Khaitan & Co
Tax advisers in Brazil are rising above the country’s notoriously complex tax system to deliver high-quality advisory services, ITR’s exclusive in-house data reveals
ITR’s data has highlighted the US firm’s ambition to become America’s ‘premier’ tax player via a concerted partner recruitment strategy
Jaap Zwaan’s arrival continues a recent streak of A&M Tax investing in the region; in other news, the US and Japan struck a deal that significantly lowered tariff rates
In a world where international tax concepts rely on human activity, Leonard Wagenaar poses existential questions about the future of such ideas when AI is ever-present
Gift this article