In the 2016-17 Budget, the Australian Government announced that it would implement a Diverted Profits Tax (DPT) to impose a 40% penalty tax on profits that have been artificially diverted from Australia by multinationals. This exposure draft Bill and associated explanatory material would strengthen the anti-avoidance rules in Part IVA of the Income Tax Assessment Act 1936 and amend the Tax Administration Act 1953 and associated Acts to give effect to the decision.
The measure is intended to target entities with annual global income of $1 billion or more that shift profits to offshore associates where:
- the resulting increase in the foreign tax liability is less than 80 per cent of the corresponding decrease in the Australian tax liability;
- there is insufficient economic substance; and
- one of the principal purposes is to obtain a tax benefit.
The Government is engaging in close consultation with interested parties in order to ensure that the implementation of this complex legislation achieves its aims. Following from earlier public engagement in May, consultation on the Diverted Profits Tax draft legislation will give all interested parties an opportunity to comment on how the policy is drafted into law.
The Diverted Profits Tax will commence on 1 July 2017, will raise $200 million in revenue over the Forward Estimates and will reinforce Australia’s position as having amongst the toughest laws in the world to combat corporate tax avoidance.
The Exposure Draft Bill and Explanatory Memorandum are available on the Treasury website. Interested parties have until 23 December 2016 to provide submissions.
