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Peter Dutton |
A draft tax bill, published by Peter Dutton, the minister for revenue, on August 16, aims to change the rules in Australia on thin capitalisation, company tax losses, capital gains tax for statutory licences, property trusts and stapled securities.
On the same day, the government announced separate plans to provide tax benefits for private investors in public-private partnerships.
Separately the Australian government was under fire from business leaders for remaining stubborn about lowering corporate tax rates.
Business Council of Australia (BCA) policy director Allesandra Fabro said that the presence of a large budget surplus gave the government the scope to look at tax reform. "This is the best time to be making some comprehensive reforms," she said. "The government should call on the Productivity Commission to conduct a comprehensive review of the business tax system."
Her comments come in the wake of an OECD report which said that Australia's corporate tax rates were less competitive than many around the world. Since company tax rates in Australia were last reduced in 2001, the state has slipped from 12th to 20th in a ranking of the 30 OECD countries.
The last comprehensive review of business taxation was the Ralph Review which was undertaken a decade ago.
Daren Yeoh, of Moore Stephens in Melbourne, says the changes announced by Dutton are wide ranging. "The Tax Laws Amendment (2007 Measures No 5) Bill proposes some significant changes to multiple areas of taxation. It will repeal section 51AD and division 16D of the Income Tax Assessment Act 1936 and replaced them with a new division 250 of the Income Tax Assessment Act 1997."
Division 250 modifies the taxation treatment of leasing and similar arrangements between taxpayers and tax exempt entities (including non-residents) for the financing and provision of infrastructure and other assets. The bill has also proposes changes to the treatment of Australian property trusts and stapled securities.
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Sydney business district |
"The intention of division 250 is to encourage private investment by reducing compliance costs, providing tax benefits and giving private builders of major infrastructure greater certainty. Private sector investors in public private partnership are now able to receive tax benefits such as capital allowances. Division 250 is a welcoming change from the harsh impact of section 51AD and division 16D," he says.
Division 250 will apply to a taxpayer where:
An asset is put to a tax preferred use; and The arrangement period is more than 12 months; and
Financial benefits in relation to the tax preferred use of the asset are provided or can reasonably be expected to be provided to the taxpayer by a tax preferred end user (or a connected entity) or a non-resident; and, but for the operation of this division, there would be an entitlement to capital allowance; and
The taxpayer lacks a 'predominant economic interest' in the asset.
The amendments also introduced a CGT roll-over relief to investors of stapled entities where an interposed trust is inserted between investors and the stapled entities. Where a capital gain or loss arises as a result of disposing interests in the stapled entities, that gain or loss will be disregarded.
The bill also proposes amendments to division 6C of the ITAA 1936. A public unit trust would not be treated as a public trading trust (and consequently taxed as a company) where following a restructure, a trust is interposed between entities in the stapled group and their equity holders.
An additional amendment to division 6C will enable a public unit trust to acquire a controlling interest in a foreign entity, where its primary business consists of investing in land outside Australia, without resulting in the trust being taxed as a company. BR
