International Tax Review is part of the Delinian Group, Delinian Limited, 8 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: 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of tax concessions, the government's position is that some, but not all, of these tax concessions are to also now be repealed or amended.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  • The company loss carry-back rules – to be repealed with effect from the start of the 2013-14 income year;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  • A number of capital allowance concessions for eligible small business entities – to be repealed broadly from January 1 2014; and

  • Immediate deductions for geothermal energy exploration and prospecting expenditure – to be repealed with effect for expenditure incurred after June 30 2014.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

More from across our site

The German government unveils plans to implement pillar two, while EY is reportedly still divided over ‘Project Everest’.
With the M&A market booming, ITR has partnered with correspondents from firms around the globe to provide a guide to the deal structures being employed and tax authorities' responses.
Xing Hu, partner at Hui Ye Law Firm in Shanghai, looks at the implications of the US Uyghur Forced Labor Protection Act for TP comparability analysis of China.
Karl Berlin talks to Josh White about meeting the Fair Tax standard, the changing burden of country-by-country reporting, and how windfall taxes may hit renewable energy.
Sandy Markwick, head of the Tax Director Network (TDN) at Winmark, looks at the challenges of global mobility for tax management.
Taxpayers should look beyond the headline criteria of the simplification regime to ensure that their arrangements meet the arm’s-length standard, say Alejandro Ces and Mark Seddon of the EY New Zealand transfer pricing team.
In a recent webinar hosted by law firms Greenberg Traurig and Clayton Utz, officials at the IRS and ATO outlined their visions for 2023.
The Asia-Pacific awards research cycle has now begun – don’t miss on this opportunity be recognised in 2023
An intense period of lobbying and persuasion is under way as the UN secretary-general’s report on the future of international tax cooperation begins to take shape. Ralph Cunningham reports.
Fresh details of the European Commission’s state aid case against Amazon emerge, while a pension fund is suing Amgen over its tax dispute with the Internal Revenue Service.