U.S. and Australia sign an agreement on the exchange of CbC reports

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According to an IRS announcement on its website, the competent authorities of the U.S. and Australia have concluded an arrangement on the exchange of Country-by-Country Reports. The competent authority arrangement (CAA) for exchange of country-by-country reports is on the basis of a double tax convention (DTC). The agreement was signed on 1 August 2017.

Under the arrangement, the first fiscal year for which the U.S. and Australia intend to exchange CbC reports is the fiscal years of MNE Groups commencing on or after January 1, 2016. The CbC report is intended to be exchanged as soon as possible and no later than 18 months after the last day of the fiscal year of the MNE Group to which the CbC report relates. CbC reports with respect to fiscal years of MNE Groups commencing on or after January 1, 2017 are intended to be exchanged as soon as possible and no later than 15 months after the last day of the fiscal year of the MNE Group to which the CbC report relates.

The Competent Authorities intend to exchange the CbC Reports automatically through a common schema in Extensible Markup Language (XML).

Australia: CbC reporting local file instructions now available

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On 4 July 2017, the Australian Taxation Office (ATO) published CbC reporting local file instructions together with some guidance on the meaning of “at the same time” for the purposes of the administrative solution. It allows reducing disclosures in the international dealings schedule which is filed together with the income tax return.

Australia: State Budget 2017-18

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On 22 June 2017, the Treasurer, Mr. Tom Koutsantonis released the 2017-18 Budget of South Australia with the following measures:

Stamp duty surcharge for foreign purchasers

From 1 January 2018, a surcharge of 4% will apply to all residential property purchases by foreign buyers and temporary residents. This measure is consistent with similar surcharges levied on foreign buyers of certain property in New South Wales, Victoria and Queensland, and Western Australia has also indicated that it will introduce a surcharge from 2019.

Major Bank levy

A South Australian major bank levy will be introduced from 1 July 2017. The levy will apply to all authorised-deposit-taking institutions that operate in South Australian and are liable for the Commonwealth Government major bank levy.

The amount payable under the South Australian major bank levy will be 0.015 per cent of South Australia’s estimated share of the total value of bank liabilities subject to the Commonwealth Government major bank levy at the end of each quarter. South Australia’s estimated share of relevant bank liabilities will be determined as South Australia’s gross state product share of national gross domestic product (currently around 6 per cent).

Other tax reforms and supporting measures

  • Lower payroll tax rate for small businesses (replaces small business payroll tax rebate) – Rate of 2.5% for taxable payrolls up to $1 million with rate incrementally increasing to 4.95% for businesses with Australian payrolls above $1.5 million.
  • Off-the-plan apartment state-wide stamp duty concession extended to 30 June 2018.
  • Land tax exemption for 5 years for investors who enter into off-the-plan apartments contracts between 22 June 2017 and 30 June 2018.
  • Pre-construction grant of $10 000 for purchases of off-the-plan apartments where construction of the apartment has not commenced and contract is entered into between 22 June 2017 to 30 September 2017.
  • Job Accelerator Grant increased by up to $5000 for each eligible new apprentice or trainee employed and eligible for an existing Job Accelerator Grant.

Australia: Treasury Laws Amendment Act 2017 received Royal Assent

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On 22 June 2017, the Treasury Laws Amendment (Foreign Resident Capital Gains Withholding Payments) Act 2017 received Royal Assent. Amends the Taxation Administration Act 1953 to modify the foreign resident capital gains withholding payments regime to: increase the withholding rate from 10 per cent to 12.5 per cent; and reduce the withholding threshold from $2 million to $750 000. For transactions entered into from 1 July 2017 the threshold and rate as stated in this Act will apply.

Australia signs MLI to prevent tax avoidance

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Australia has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”). The Minister for Trade, Tourism and Investment, Mr. Steven Ciobo MP, signed the Convention for Australia at a ceremony hosted by the Organisation for Economic Cooperation and Development (OECD) in Paris on 7 June 2017.  67 other jurisdictions also signed the Convention, including 35 of Australia’s bilateral tax treaty partners.

The Convention is a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, which aims to ensure that multinationals pay tax in the jurisdiction where economic value is created or added.

Once in force, the Convention will modify most of Australia’s bilateral tax treaties to implement new integrity rules that will help prevent exploitation for tax avoidance purposes and improve tax treaty-based dispute resolution mechanisms.

The Convention will enter into force after signatories have completed their domestic requirements and deposited their instruments of ratification with the OECD. Legislation will be introduced into the Australian Parliament as soon as practicable to give the Convention the force of law in Australia.

Australia: FTA negotiation with Peru

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On 24 May, Australia and Peru launched negotiations for a free trade agreement (FTA). A fellow signatory to the Trans-Pacific Partnership (TPP) Agreement, Peru has been one of the fastest growing economies in Latin America. A Peru-Australia FTA would enable Australian businesses to access the opportunities presented by that growing market.

Furthermore, Peru is a growing market for Australian goods and services exporters. In 2015-16, total two-way trade in goods and services with Peru was worth $504 million, up 19.4% from the previous year. An FTA with Peru would provide Australian businesses with an opportunity to expand engagement with this emerging market.

Australia: New rate for franking credits

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The company tax rate for small business has been reduced to 27.5% for 2016-17 and the maximum franking credit of small business has decreased to 27.5% (previously 30%). This reduced rate applies to companies with an aggregated turnover of less than $10 million.

If a corporate tax entity fully franked a distribution during its 2016-17 income year before the Treasury Laws Amendment (Enterprise Tax Plan) Act 2017 (the amending Act) became law on 19 May 2017, the amount of the franking credit on the distribution statement provided to members may be incorrect. This is because the franked distribution would likely be based on the 30% corporate tax rate, when the entity’s tax rate for that income year may in fact be 27.5% because of the law change.