There have been several developments in Australia over that past month that affect businesses, including changes to the goods and services tax (GST) rules, more transparency on the beneficial owners of companies, and amendments to transfer pricing provisions. All of these recent changes are discussed below.
Proposed legislation to introduce GST on low value imported goods
On February 16 2017, the government introduced a bill in Parliament that proposes extending GST to low value imports of physical goods (being goods valued at A$1,000 ($750) or less) imported by consumers from July 1 2017.
In some situations, operators of electronic distribution platforms and entities that assist consumers to acquire goods from overseas are deemed to make the supply and thus liable to account for GST.
On February 24 2017, the Australian Taxation Office (ATO) released a draft law companion guideline LCG 2017/D2 (Draft Guideline), which discusses the amendments proposed in the bill. The draft guideline discusses, among other things, the method to calculate the GST payable on a supply of low-value goods, the rules to prevent double taxation of goods and how the rules interact with other rules under which supplies are connected with Australia.
Increasing transparency of beneficial ownership of companies: Consultation paper
Separately, on February 13 2017, the Minister for Revenue and Financial Services Kelly O'Dwyer released for public consultation a paper, entitled "Increasing Transparency of the Beneficial Ownership of Companies", which seeks views on increasing the transparency of the beneficial ownership of companies to better assist the relevant authorities in various areas including tax evasion and money laundering. The release of the consultation paper is part of Australia's commitment to the G20's global transparency push to implement rules requiring the disclosure of beneficial ownership of legal entities.
ATO releases guidelines on simplified transfer pricing record keeping options
Recently, the ATO released Practical Compliance Guidelines PCG 2017/2, which outline the types of transactions or activities the ATO considers to be low risk in the context of international related party dealings and specifies the criteria for taxpayers to self-assess their eligibility to access the simplified transfer pricing record keeping regime.
Examples of eligible taxpayers include taxpayers with an annual Australian turnover of less than A$25 million (subject to satisfying the other criteria, including not having related party dealings with entities in specified countries, such as Cayman Islands and Bermuda), or where the total international related party dealings represent less than or equal to 2.5% of total turnover for the Australian economic group (plus other criteria).
Once eligible, these taxpayers are able to meet their compliance obligations with a reduced level of transfer pricing documentation and the ATO will not allocate compliance resources to review the covered transactions specified in that option for transfer pricing purposes, beyond reviewing the eligibility to use the option.
Transfer pricing rules to reflect revised OECD Guidelines
A legislation is now before the Australian Parliament that, if enacted, will ensure that the Australia's transfer pricing rules are interpreted to achieve consistency with the revised OECD Guidelines (which incorporate the recommendations set out in the BEPS reports to ensure that the international standards for transfer pricing rules should result in outcomes in which the allocation of profits is aligned with the economic activity). Requiring consistent interpretation with the amended OECD Guidelines (where relevant) does not imply that Australia is adopting the OECD functionally separate entity approach to the attribution of profits to permanent establishments. Australia will instead maintain the relevant business activity approach. These proposed amendments will apply to income years commencing on or after July 1 2016 if enacted.
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