On 6 February 2018, KPMG Sydney hosted senior Australian Taxation Office (ATO) officials, clients and Treasury representatives in a tax forum discussion. The meeting covered a wide range of topics in respect of infrastructure specifically but does have wider impact, including:
- Emerging tax landscape
- Debt funding
- Stapled structures
- Public Private Partnerships and
- Other issues, including Infrastructure Framework, Negative Control, Corporate Collective Investment Vehicle (CCIV), Sovereign immunity and Foreign Hybrids.
We provide below three key takeaway messages from the discussion forum. For further detailed comments, we encourage you to contact a member of KPMG’s Deal Tax Team.
- Just over a year after the ATO issued Tax Alert 2017/1, the ATO confirmed its position has not changed. That is, outside privatisations and certain property transactions, the ATO will seek to apply Part IVA to stapled structures. An area of scrutiny includes reviewing the terms of the sublease to determine the arrangement it is in fact a “lease” and not a “licence”. In response to an audience question, the ATO noted several stapled structures that have been considered by the ATO GAAR panel, Part IVA has been found to apply in all cases reviewed.
- Debt funding has been highlighted as the number one tax risk area by the ATO. The ATO is currently reviewing their position regarding shareholder loans, and for stakeholders to “watch this space”. It is fair to say that the ATO is carefully looking at shareholder debt and whether shareholder debt derogates from the equity investment as a stand-alone instrument.
- Although the ATO will continue to accept the “vanilla” securitised licence structure, there is a strong desire to simplify the structure for PPPs, particularly in light of recent accounting standards in relation to service concession arrangements.
- It was evident that the ATO continues to develop their thinking on what they consider “aggressive” structures and to increase compliance activities in these areas.