Peter Madden, National Leader of International Tax, provides key insight into the features of the Government's introduction to diverted profits tax (DPT).
The Government announced as part of the 2016 Federal Budget an intention to introduce a diverted profits tax (DPT) with effect for income years beginning from 1 July 2017. No grandfathering of existing arrangements is proposed.
The DPT is modelled on the second limb of the United Kingdom’s DPT. The first limb was introduced as Australia’s multinational anti-avoidance law (MAAL).
Broadly, the DPT targets arrangements with ‘insufficient economic substance’ between an Australian entity and an overseas related party that is taxed at a rate less than 80 percent of the applicable Australian tax rate.
Essentially, due to the ‘application rules’ (see below) the objective of the DPT is to change the balance of negotiating power between the Australian Taxation Office (ATO) and large business on transfer pricing and structuring issues.
Key features of DTP are:
Submissions to Treasury on the proposed DTP are due by 17 June 2016.
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