Australia: New government’s tax agenda

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

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

Australia: New government’s tax agenda

seymour.jpg

Tom Seymour

The recently elected Australian government has made the first move towards repealing the Minerals Resource Rent Tax (MRRT) and the carbon pricing mechanism, with effect from July 1 2014, with the release of legislation to give effect to the repeal. As the introduction of the MRRT, which applies to Australian iron ore and coal miners, was linked to a number of tax concessions, the government's position is that some, but not all, of these tax concessions are to also now be repealed or amended. These include:

  • The company loss carry-back rules – to be repealed with effect from the start of the 2013-14 income year;

  • The increase to the compulsory superannuation guarantee (SG) charge to 12% – to be adjusted so that the 12% rate will not apply until July 1 2021 instead of July 1 2019;

  • A number of capital allowance concessions for eligible small business entities – to be repealed broadly from January 1 2014; and

  • Immediate deductions for geothermal energy exploration and prospecting expenditure – to be repealed with effect for expenditure incurred after June 30 2014.

The government has also made inroads into clearing the backlog of announced but not enacted tax measures from previous governments indicating that some measures will be abandoned and some will be subject to further consultation.

Of particular interest to large businesses with international operations was the fate of the package of measures announced by the previous government in the Federal Budget in May 2013, which were designed to tackle profit shifting through artificial loading of debt in Australia.

In a pleasing move, the new government announced that it will not proceed with the measure to deny interest deductions for debt funding costs associated with investments in foreign companies that generate exempt dividends, and will instead introduce a targeted anti-avoidance rule after consultation with stakeholders. The other elements of the international reform package, however, will proceed as originally announced. Specifically, the government will continue with the tightening of the thin capitalisation rules by reducing the safe harbour debt limit to 1.5:1 debt-to-equity ratio (reduced from the current 3:1 ratio). Additionally, it will remove the exemption for foreign non-portfolio dividends in respect of shares that are treated as debt interests for Australian tax purposes.

The government also indicated that it will not proceed with several other measures, including amendments to the tax treatment of Offshore Banking Units (to be replaced with a targeted integrity measure).

A number of outstanding tax measures have been given the go ahead, including the removal of the R&D tax incentive for very large businesses, a range of amendments to the tax consolidation provisions announced in this year's Federal Budget, the introduction of a new tax regime for Managed Investment Trusts and the third tranche of the Investment Manager Regime which provides a tax exemption for passive investments of certain foreign widely held funds.

Tom Seymour (tom.seymour@au.pwc.com)

PwC

Tel: +61 (7) 3257 8623

more across site & shared bottom lb ros

More from across our site

SF: Germany has forgotten to think about digital reporting requirements, a WTS partner claimed at ITR’s Indirect Tax Forum 2025
E-invoicing is currently characterised by dynamism, with fragmentation acting as a key catalyst for increasing interoperability, says Aida Cavalera of the International Observatory on eInvoicing
Pillar two and the US tax system ‘could work in harmony’, Scott Levine tells ITR in an exclusive interview to mark his arrival at Baker McKenzie
Peter White, who has a tax debt of A$2 million, has been banned for five years from seeking registration with Australia’s Tax Practitioners Board (TPB)
Wopke Hoekstra’s comments followed US measures aimed against ‘unfair foreign taxes’; in other news, Grant Thornton and Holland & Knight made key tax partner hires
An Administrative Review Tribunal ruling last month in Australia v Alcoa represents a 'concerning trend' for the tax authority, one expert tells ITR
A recent decision underlines that Indian courts are more willing to look beyond just legal compliance and examine whether foreign investment structures have real business substance
Following his Liberal Party’s election victory, one source expects Mark Carney to follow the international consensus on pillar two, as experts assess the new administration
A German economics professor was reportedly ‘irritated’ by how the Finnish ministry of finance used his data
Countries that care about the fair taxation of tech multinationals and equitable global distribution of wealth should back the UN’s tax framework, writes economist Abdelmalek Riad
Gift this article