International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

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

Australia: Australian government submits DPT Bill to parliament


Michael Yunan

Following further consultation, final legislation to implement a diverted profits tax (DPT) in Australia has been introduced into parliament.

The legislation is largely consistent with the earlier exposure draft, although certain additions and carve outs (e.g. for sovereign wealth funds and foreign pension funds) have been made to the final legislation.

The key purposes of the DPT (modelled on the second limb of the UK DPT) are to ensure that the Australian tax payable by "significant global entities" (global groups with annual turnover of at least AU$1 billion ($750 million)) properly reflects the economic substance of the activities those entities carry on in Australia, and to prevent those entities from reducing the amount of Australian tax they pay by diverting profits offshore through contrived arrangements between related parties.

If passed in its current form, the DPT will apply to income years starting on or after July 1 2017.

Taxation of hubs

The Australian Taxation Office (ATO) has also released Practical Compliance Guideline PCG 2017/1 in relation to the ATO's approach to the transfer pricing issues arising for the use of offshore centralised operating models or "hubs".

This follows concerns publicly expressed by the ATO about the use by multinationals (especially large Australian mining companies) of sales and marketing hubs based in lower tax jurisdictions (such as Singapore) to shift profits out of Australia. This is achieved through the payment of high fees to offshore associates that provide centralised services to Australian businesses (without substantially altering any goods or commodities).

PCG 2017/1 provides a framework for hub risk assessment to assist taxpayers to manage the compliance risk of their hubs and understand the ATO's compliance approach for hubs. This includes the criteria the ATO consider when categorising the level of risk of a hub. The higher the risk rating, the higher the priority for an ATO review. Risk ratings can be decreased through certain types of "good behaviour", such as preparing appropriate transfer pricing documentation or ensuring the pricing of transactions with hubs is within certain thresholds.

The ATO also outlines what taxpayers can expect by way of ATO compliance activities if their hub is inside or outside the "green" safe zone and provides guidance for preparing transfer pricing analysis. This should be read in the context of the DPT, which could alter how the ATO would in practice pursue a high risk hub (and the penalties involved).

Stapled structures

The ATO has released a controversial Taxpayer Alert TA 2017/1: Re-characterisation of income from trading businesses, signalling its intention to review the "stapled structures" commonly used by foreign and Australian investors in a variety of projects. The ATO is concerned by the use of stapled structures to artificially fragment integrated trading businesses in order to re-characterise trading income into more favourably taxed passive income.

This could potentially impact stapled structures used in a number of contexts, including infrastructure projects such as energy, toll roads, telecommunications and ports. Stapled structures are also common in the real estate sector and in privatisations but these are excluded from TA 2017/1.

TA 2017/1 describes the different types of stapled structures that will be targeted. These typically have the following features:

  • A flow-through trust (asset trust) that holds "passive" assets, such as land and fixtures, is stapled to another entity (operating entity);

  • The operating entity leases the passive assets from the asset trust (for a fee) and operates the business of the stapled group; and

  • The asset trust may qualify for a concessional withholding tax rate of 15% on distributions of profit to non-resident investors. The operating entity is taxed at the standard company tax rate of 30% but has minimal profit due to the lease payments.

In such instances, the ATO is considering a number of ways to eliminate the tax benefits of the stapled structure, including denying the flow-through status of the asset trust (so that it is taxed like a company) and applying the general tax anti-avoidance rules.

This opens up practical difficulties and may signal a departure from past practice, as stapled structures have been used for many years and previously accepted by the ATO. Going forward, the ATO's position will be closely scrutinised as it continues to develop its position and provides further guidance.

Michael Yunan (

DLA Piper Australia

Tel: +61 3 9274 5007


more across site & bottom lb ros

More from across our site

The General Court reverses its position taken four years ago, while the UN discusses tax policy in New York.
Discussion on amount B under the first part of the OECD's two-pronged approach to international tax reform is far from over, if the latest consultation is anything go by.
Pillar two might be top of mind for many multinational companies, but the huge variations between countries’ readiness means getting ahead of the game now, argues Russell Gammon, chief solutions officer at Tax Systems.
ITR’s latest quarterly PDF is going live today, leading on the looming battle between the UN and the OECD for dominance in global tax policy.
Company tax changes are central to the German government’s plan to revive the economy, but sources say they miss the mark. Ralph Cunningham reports.
The winners of the ITR Americas Tax Awards have been announced for 2023!
There is a ‘huge demand’ for tax services in the Middle East, says new Clyde & Co partner Rachel Fox in an interview with ITR.
The ECB warns the tax could leave banks with weaker capital levels, while the UAE publishes guidance on its new corporate tax regime.
Caroline Setliffe and Ben Shem-Tov of Eversheds Sutherland give an overview of the US transfer pricing penalty regime and UK diverted profits tax considerations for multinational companies.
The result follows what EY said was one of the most successful years in the firm’s history.