Can you afford a forty percent tax on your profits?
Almost a year after introduction of the Diverted Profits Tax (DPT) Bill into Parliament, the ATO has now released draft guidance to assist organisations in assessing their level of risk under the DPT. The DPT is a new tax, aimed at arrangements that divert profits from Australia to a country where the effective tax rate is less than 24 percent and there is insufficient economic substance to justify those profits. A DPT liability is assessed at 40 percent of the diverted profits and is payable up-front.
The Government has stated that approximately 1,470 taxpayers are in scope of the DPT, with 130 estimated to be in the ‘high risk’ category.
Once the ATO issues an assessment, the taxpayer has 12 months to provide information to the ATO to establish that the assessment is excessive. The matter will be referred to the General Anti-Avoidance Review (GAAR) Panel. The taxpayer cannot ‘object’ to the assessment, rather it must appeal to the Federal Court.