Australia’s Treasurer Jim Chalmers presented the 2024-25 Budget yesterday, 14 May, 2024.
The key proposals in the budget are as follows:
- Adjust the start date of the 2023–24 Budget measure on Tax Integrity, which expands the general anti-avoidance rule in income tax law from income years beginning on or after 1 July 2024 to income years beginning on or after the date the amending legislation receives Royal Assent. This measure broadens the application of the general anti-avoidance rule to include:
- Schemes that reduce tax paid in Australia by leveraging a lower withholding tax rate on income paid to foreign residents.
- Schemes that secure an Australian income tax benefit, even in cases when the main intention was to lower foreign income tax.
- Modifying the provision included in the 2022–23 October Budget regarding the Multinational Tax Integrity Package by modifying Australia’s interest limitation (thin capitalisation) rules. This reform will exempt Australian plantation forestry entities from the new earnings-based rules, which will allow these entities to continue using the former asset-based thin capitalisation rules.
- Halt the measure included in the October 2022–23 Budget, that denies deductions for payments related to intangibles held in low or no-tax jurisdictions. The integrity issues will now be addressed through the implementation of the Global Minimum Tax and Domestic Minimum Tax by the government.
- Starting from 1 July, 2026, a new provision will penalise taxpayers who belong to groups with an annual global turnover exceeding AUD 1 billion. These penalties will apply if they are found to have mischaracterised or undervalued royalty payments with the intent to avoid paying royalty withholding tax.
- Enhance the foreign resident capital gains tax (CGT) scheme to ensure fair tax payments from foreign residents in Australia. The changes will be applicable to CGT programmes starting on or after 1 July, 2025, and
- Define and expand the types of assets subject to CGT for foreign residents.
- Modify the point-in-time principal asset test within a 365-day evaluation period.
- Mandate that foreign residents notify the ATO before selling shares and other membership interests exceeding AUD 20 million in value.
- The budget highlights the cost-of-living tax cuts for individuals, which will take effect on 1 July, 2024. These include lowering the rates for the lower tax brackets to 16% and 30% while raising the thresholds for the upper tax brackets.
