The Government has released exposure draft legislation to amend the anti-avoidance rules in Part IVA of the Income Tax Assessment Act 1936 (Cth) to prevent multinational entities using artificial or contrived arrangements to avoid a taxable presence in Australia. We will continue to monitor the progress of the exposure draft legislation.
Following the release of the Federal Budget, Treasury has released an Exposure Draft Tax Laws Amendment (Tax Integrity Multinational Anti-avoidance Law) Bill 2015 (Exposure Draft).
The new legislation, if enacted, would amend the anti-avoidance rules in Part IVA of the Income Tax Assessment Act 1936 (Cth) targeted at the erosion of the Australian tax base by approximately 30 specific multinational entities (according to Treasury) using artificial or contrived arrangements to avoid the attribution of business profits to Australia.
The measure, which will only apply where the non-resident's annual global revenue is greater than AUD$1 billion, is intended to target situations in which:
- a foreign multinational supplies goods or services to Australian customers and books that revenue offshore;
- the activities of an Australian entity are integral to the Australian customer’s decision to purchase the goods or services;
- the profits from Australian sales are subject to low or no global tax; and
- one of the principal purposes of the arrangements is to obtain a tax benefit (or both to obtain a tax benefit and to reduce other tax liabilities under Australian law (other than income tax) or under a foreign law).
Where the measure applies, it is proposed that the Commissioner of Taxation may cancel the Australian tax benefits obtained in connection with the scheme.
The measure is proposed to apply to tax benefits obtained from 1 January 2016 (under both new and existing schemes).
Submissions on the Exposure Draft closed on 9 June 2015.