Change in corporate tax rate
The Government will progressively reduce the company tax rate over 10 years, as outlined in the table below. A company tax rate of 30% will be applied where the aggregated turnover threshold listed is exceeded. Franking credits will be distributed at the rate at which the company making the distributions paid tax.
|Income Year||Company Tax Rate||Annual Aggregated Turnover|
|2023||27.5%||$ 1 Billion|
The company tax rate will be further reduced progressively from the 2024-25 income year as follows:
|Income Year||Company Tax Rate|
A New Diverted Profits Tax
From 1 July 2017 a 40% diverted profits tax will be introduced on the profits of multinational corporations that are artificially diverted from Australia.
The tax will target companies that shift profits offshore through arrangements involving related parties:
- that result in an amount of tax being paid overseas that is less than 80% of the amount of tax that would otherwise have been paid in Australia
- where it is reasonable to conclude that the arrangement is designed to secure a tax reduction; and
- that do not have sufficient economic substance
The measure will apply to significant global entities that have a global turnover of $1 billion or more. Where these entities have an Australian turnover of less than $25 million they will be exempted from the tax unless income is artificially booked offshore.
The transfer pricing laws will be amended from 1 July 2016 to bring them in line with the OECD’s BEPs related recommendations. The changes are focused on:
- Transactions relating to intangibles (Action 8)
- Contractual allocation of risk (Action 9)
- Transactions that are not commercially rational (Action 10)
The Government remains committed to implementing laws to eliminate hybrid mismatch arrangements. The new laws will implement the OCED recommendations and will be effective from 1 July 2018.
The penalties applying to “significant global entities” (groups with global turnover in excess of $1bn) for late lodgement of, or failure to lodge, tax documents are being increased. In some instances the penalty will increase from $4,500 to $450,000 – a 100 fold increase.
Tax Avoidance Taskforce
The Government is funding the ATO to establish a new Tax Avoidance Taskforce, focusing on enhancing compliance activities targeting multinationals, large private groups and high wealth individuals.
The taskforce will partner with other organisations including AUSTRAC, ASIC and the AFP. The activities of the taskforce are expected to raise $3.7bn in additional revenue.
Taxation of Financial Arrangements (TOFA) rules to be simplified
The TOFA rules will be reformed providing a new framework which will remove the majority of taxpayers from the TOFA regime. This should result in lower compliance costs and provide simpler rules with more certainty. The new simplified rules will apply to income years on or after 1 January 2018.
Changes to the tax consolidation regime
Measures will be introduced to eliminate inappropriate outcomes arising during the entry and exit tax cost setting process in respect to deferred tax liabilities. The changes will be applicable to events resulting in members joining or leaving a tax consolidated group after the date of amending legislation is introduced in Parliament.
The Government will also modify previously announced measures to address the tax benefit arising from the double counting of deductible liabilities under the consolidation regime. The start date for this measure will be deferred from 14 May 2013 to 1 July 2016.