The Australian Taxation Office (ATO) declared that a court has ruled in its favor for its decision about enforcing the diverted profits tax (DPT). The DPT applies to multinationals or significant global entities (SGEs) with an annual global income of A$1 billion or more. The DPT applies to income years that start on or after 1 July 2017. Additionally, it can apply to schemes entered into before 1 July 2017.
The Diverted Profits Tax (DPT) is designed to ensure the tax paid by significant global entities (SGE) properly reflects the level of their economic activities in Australia. It aims to prevent the diversion of profits offshore through contrived arrangements. It imposes a 40% penalty rate of tax to be paid upfront.
The DPT aims to prevent the diversion of profits offshore through arrangements involving related parties and encourages SGEs to provide sufficient information to the ATO to allow for the timely resolution of tax disputes. The DPT is a separate tax liability from income tax. Therefore, a taxpayer may have an income tax assessment and DPT assessment in respect of the same period.
