The last Parliamentary Winter sittings were held last week and there are quite a few significant tax bills still before Parliament that are on hold until Parliament resumes again on 13 August 2018.
The most significant is the bill on hold relates to company tax rate cuts, Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017. This bill would cut the company tax rate from 30 percent to 25 percent across the board. To pass it into law, the government needs eight crossbench votes and so far it has only four. The Finance Minister noted last week that, despite their best efforts, they have not yet been able to secure the necessary support and have decided to defer consideration of the legislation until after the Parliamentary break (and after five by-elections on 28 July).
Another bill that relates to company tax cuts is Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2018 which proposes to amend the Income Tax Rates Act 1986 to provide that a corporate tax entity will not qualify for the lower 27.5 percent corporate tax rate if more than 80 percent of its assessable income is income of a passive nature. This proposed amendment applies from the 2017-18 income year.
Other outstanding tax bills affecting business include:
- Hybrid mismatch: Treasury Laws Amendment (Tax Integrity and Other Measures No. 2) Bill 2018 implements the OECD hybrid mismatch rules by preventing entities that are liable to income tax in Australia from being able to avoid income taxation, or obtain a double non-taxation benefit. The proposed Australian Labor Party (ALP) amendments relate to film tax offsets and not the anti-hybrid measures. I suspect this will pass at the next Parliamentary sitting. These measures will generally apply to income years beginning on or after 1 January 2019 (except for importing payments under structured arrangements, which will be subject to the imported mismatch rule for income years starting on or after 1 January 2020).
- Multilateral instrument: Treasury Laws Amendment (OECD Multilateral Instrument) Bill 2018 amends the International Tax Agreements Act 1953 to give legislative effect to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. For the treaty to come into force, Royal Assent is required and then three months must elapse from the date of the depositing of the instrument of ratification (post Royal Assent) with the Secretary General of the Organisation for Economic Co-operation and Development (OECD). It will enter into force on the day of the month following the elapse of the three months.
- Public Reporting of Corporate Entity Tax: Taxation Administration Amendment (Corporate Tax Entity Information) Bill 2017 is a private members bill introduced into the Senate by Senator Katy Gallagher in August last year that proposes to amends the Taxation Administration Act 1953 to lower the threshold for the public reporting of corporate entity tax information by the Australian Taxation Office (ATO) for private corporate entities to $100 million from $200 million. However, the Greens proposed to reduce the threshold to $50 million and this has passed the Senate and now the Bill moves to the House for debate when Parliament resumes.
- Black Economy: Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Bill 2018 amends:
- Income Tax Assessment Act 1997 and Taxation Administration Act 1953 to prohibit sales suppression tools in relation to entities that have Australian tax obligations and
- Taxation Administration Act 1953 to require entities that provide courier or cleaning services to report to the ATO details of transactions that involve engaging other entities to undertake those services for them.
- CGT, MIT and public trading trust definition: Treasury Laws Amendment (2018 Measures No. 2) Bill 2018. Key tax changes in this bill are Income Tax Assessment Act 1997 provisions in relation to capital gains tax (CGT) transactions, managed investment trusts and the early stage investor tax offset and Income Tax Assessment Act 1936 to amend the definition of public trading trusts.
- CGT main resident exemption and TARP: Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 2) Bill 2018 was introduced with the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Near-new Dwelling Interests) Bill 2018, and incudes amendments to the Income Tax Assessment Act 1997 to remove the entitlement to the CGT main residence exemption for foreign residents; and clarify that, for the purpose of determining whether an entity’s underlying value is principally derived from taxable Australian real property under the foreign resident CGT regime, the principal asset test is applied on an associate inclusive basis.
- Minor MAAL amendments: Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018 amends the income tax law to provide that, when determining if the multinational anti-avoidance law (MAAL) applies to a scheme, supplies made and income received by a closely related trust or partnership are treated as being made or received by a foreign entity; include additional conditions that must be satisfied to apply the small business CGT concessions to capital gains; to ensure that venture capital investment tax concessions are available for investments in fintech businesses.
- $20,000 write off extended: Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Bill amends the Income Tax Assessment Act 1997 and Income Tax (Transitional Provisions) Act 1997 to extend by 12 months to 30 June 2019 the period during which small business entities can access expanded accelerated depreciation rules.
Many of these Bills will affect large and small business and it would be prudent to monitor these bills when Parliament resumes on 13 August 2018.