Australian Government's Plans for Unenacted Tax Measures The Announcement

21 November 2013
Practice Group:
Corporate and
Transactional - Tax
Australian Government's Plans for Unenacted Tax
By Betsy-Ann Howe and Benita Howell
The Announcement
At the time the Coalition Government (Government) was elected in September 2013,
there were 96 tax and superannuation proposals announced by the previous government
that had not been enacted. On 6 November 2013, the Government released a statement
clarifying its intentions regarding these proposed measures.
Of the 96 proposals:
four have been addressed by the proposed mining and carbon tax repeal packages
the Government will proceed with 18 without any major amendments
three will be substantially amended before the Government intends to pass them
the Government will not proceed with seven of the proposals
64 will be a subject to a review by Assistant Treasurer, Arthur Sinodinos AO, with
assistance from the Board of Taxation. This review starts with a disposition not to
proceed with the remaining 64 measures and will investigate whether there are any
compelling reasons to alter this position. The Government will consult with tax
experts and industry in coming to a final decision.
The Government is intending to resolve all policies relating to these matters by 1
December 2013 for inclusion in the Mid Year Economic and Fiscal Outlook.
Key Measures That Will Proceed
The measures that will proceed as previously announced include:
introducing a new managed investment trust regime – including the creation of an
elective 'attribution' system of taxation to replace the present entitlement system
broadening the definition of Taxable Australian Real Property to incorporate mining
information and goodwill in mining businesses
the introduction of a 10 percent non final withholding tax from 1 July 2016 on non
residents disposing of certain taxable Australian property
denying the research and development tax offset to large companies with incomes of
AUD20 billion or more
improving the integrity of the consolidation regime including preventing entities
claiming double deductions
working towards signing and enacting a treaty status inter-governmental agreement
with the United States to enable the financial sector to comply with U.S. Foreign
Account Tax Compliance Act (FATCA) reporting rules
implementing Element 3 of the investment manager regime, which extends the
conduit income measures:
The Government's Plans for Unenacted Tax Measures
to exempt foreign managed funds from tax on gains from the disposal of foreign
non-portfolio investments
to exempt those funds from tax on gains from the disposal of certain portfolio
Australian financial arrangements.
better targeting the deduction for exploration expenses to genuine exploration activity
– restricting the immediate deduction for the cost of acquiring mining rights, so that it
is only available for genuine exploration activities.
Key Measures That Will be Substantially Amended
The measures that the Government will substantially amend before seeking to pass them
measures to address aggressive tax structures that seek to shift profits by artificially
loading debt into Australia:
the proposed 'tightening' of the thin capitalisation will proceed with the general
safe harbour debt to equity ratio being reduced from 75 percent of adjusted
Australian assets to 60 percent, the worldwide gearing ratio reduced from 120
percent to 100 percent and an extension of the worldwide gearing test to inbound
investors. However, the de minimis threshold test will be increased from
AUD250,000 to AUD2 million per annum of debt deductions
the Government will however not proceed with Labor's proposal to deny interest
deductions taken under Section 25-90 of the Income Tax Assessment Act 1997
in relation to investments producing foreign income which is non-assessable nonexempt income in Australia. Instead, the Government will seek to introduce a
targeted anti-avoidance provision.
previously announced changes to the exemption for foreign non-portfolio dividends
(s 23AJ) will proceed so that the provision applies to returns on foreign non-portfolio
equity interests
the proposed changes to the offshore banking unit regime including integrity
measures. The measure that proposed to exclude all related party dealings will not
proceed and instead a targeted integrity rule will be introduced.
Key Measures That the Government Will Not Proceed With
The measures that the Government will not proceed with include:
the abolition of the statutory formula method for calculating fringe benefit tax on
salary-sacrificed and employer provided cars
the AUD2,000 cap on the amount people can deduct as self-education expenses
tax on earnings on superannuation assets supporting retirement income streams
above AUD100,000.
The Government's Plans for Unenacted Tax Measures
Key Measures Subject to Review
The measures that will be subject to a review (with a disposition not to proceed) include:
the proposed rewrite of the controlled foreign corporation (CFC) rules
the proposed amendments to the Capital gains tax earnout rules.
Betsy-Ann Howe
Benita Howell
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