On 22 March 2018, the Australian Government’s commitment to ensure multinationals pay the right amount of tax in Australia continued with the passage through Parliament of the Treasury Laws Amendment (Income Tax Consolidation Integrity) Bill 2018.
This Bill implements recommendations made by the Board of Taxation to improve the integrity and operation of Australia’s tax system, by closing loopholes in the tax consolidation regime which create unintended and inappropriate tax outcomes.
Tax consolidation allows wholly-owned corporate groups to be treated as a single entity for tax purposes. This Bill puts to an end the practice of ‘churning’ entities between related parties, ensuring that multinational consolidated groups pay the right amount of tax on gains from their Australian assets.
This Bill also improves the integrity and operation of the consolidation regime by:
- changing the tax treatment of liabilities which give rise to a future tax deduction, ensuring a double tax benefit does not arise,
- removing deferred tax liabilities from consolidation calculations,
- ensuring anomalous outcomes do not arise from securitization transactions commonly undertaken by financial institutions,
- better aligning the tax treatment of certain assets and liabilities with the economic substance of transactions, and
- preventing double tax deductions from arising when value is shifted across entities.
