Late last year, the Australian government passed legislation implementing two significant international taxation measures in Australia, which both took effect from July 1 2024:
Public country-by-country reporting (CbC) rules; and
A tax concession regime for eligible build-to-rent (BTR) projects.
Further details of each measure are provided below.
Public CbC reporting rules
The public CbC rules, which received royal assent on December 10 2024, require large multinational groups with a material Australian presence to submit certain financial and tax information to the Australian Taxation Office (ATO), which will be made publicly available on an Australian government website.
Who is required to report?
An entity will be required to report under the Australian public CbC rules if all the following requirements are satisfied:
The entity is a CbC reporting parent for a period preceding the reporting period;
The entity is a constitutional corporation, a partnership in which each of the partners is a constitutional corporation, or a certain type of trust;
The entity is a member of a CbC reporting group at any time during the reporting period;
At any point during the reporting period, it, or a member of its CbC reporting group, is an Australian resident or a foreign resident with an Australian permanent establishment; and
A$10 million or more of its aggregated turnover for the income year is Australian sourced.
What type of information is required to be reported?
The reporting entity will be required to publish the following information:
Its name and the names of each entity in the CBC reporting group;
A description of the CBC reporting group’s approach to tax;
Information about Australia and specified jurisdictions, on a CbC basis; e.g., number of employees, certain financial information, income taxes paid and accrued (and reasons for the differences between these two figures), and the currency used; and
Information about its other jurisdictions, either on a CbC or an aggregated basis.
The public CBC reporting form and instructions are expected to be made available by the ATO in 2025.
The information required under the Australian public CbC regime slightly differs from the public CbC reporting requirements in other jurisdictions, such as the EU. For example, the Australian public CbC rules have identified 41 countries (including Singapore, Hong Kong, and Switzerland) that must be reported on a CbC basis, which is broader than the 11 "non-cooperative" jurisdictions in the EU.
When are the reports due?
The relevant information must be provided electronically to the ATO within 12 months after the end of the relevant reporting period. Thus, the first public CBC reports will be due by June 30 2026 (for the year ended June 30 2025).
Multinationals operating in Australia should become aware of this new filing obligation and prepare in advance the information required to be filed, noting the slight differences in the reporting obligations in Australian compared with other public CbC reporting regimes.
Build-to-rent concessions
New tax concessions were introduced for eligible BTR projects in Australia with effect from July 1 2024, after the relevant act received royal assent on December 10 2024. The new tax concessions for BTR projects comprise:
Reducing the withholding tax from 30% to 15% for distributions of net rental income and capital gains to foreign investors by managed investment trusts for eligible BTR projects; and
Increasing the capital works tax deduction (e.g., tax depreciation for construction costs) from 2.5% to 4% for eligible BTR projects.
The key requirements for eligible BTR projects are as follows:
The BTR development consists of 50 or more dwellings made available for rent to the general public.
All the dwellings in the BTR development continue to be directly owned by a single entity for at least 15 years (but not necessarily the same single entity; e.g., the BTR development can be sold to another single entity).
Dwellings must be offered for lease terms of at least five years throughout the 15-year period (unless the tenant requests a shorter period).
At least 10% of the dwellings in the BTR development are offered as “affordable dwellings” throughout the 15-year period. Generally, an affordable dwelling is one that is rented out for no more than 74.9% of market rent.
A clawback tax (the ‘BTR development misuse tax’) will apply where an eligible BTR development ceases to be eligible during the initial 15-year period. The clawback tax effectively negates the benefit of all the tax concessions obtained up to the cessation time.
With a current housing shortage in Australia, these concessions are targeted at encouraging foreign investment into Australia's nascent BTR sector, which currently only comprises a very small proportion of residential dwellings in Australia.
