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Tax legislation yet to pass parliament

Tax legislation yet to pass parliament

Jenny Wong discusses tax legislation currently before Parliament.

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Director, Australian Tax Centre

KPMG Australia

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Parliament House Canberra

As Prime Minister Scott Morrison and Treasurer Josh Frydenberg get their feet under their respective desks, it’s timely to reflect on what tax legislation we saw passed in the last sittings of parliament, and what is still outstanding. Parliament resumes on September 10.

As we know the Federal Government’s plans for company tax rate cuts, Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017, did not pass the Senate last week. This legislation would have reduced the company tax rate down to 25 percent to all corporate tax entities.

Related legislation, Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2018, did pass however, and now awaits Royal Assent. The Bill disqualifies companies from the lower tax rate if more than 80 percent of their income is passive. The Australian Taxation Office (ATO) has also released a draft ruling LCR 2018/D7 that provides advice on this Bill including what amounts are base rate entity passive income.

Also to pass were the anti-hybrid measures, Treasury Laws Amendment (Tax Integrity and Other Measures No. 2) Bill 2018, which prevents entities that are liable to income tax in Australia from being able to avoid income taxation, or obtain a double non-taxation benefit. The measures apply from 1 January 2019.

The Treasury Laws Amendment (OECD Multilateral Instrument) Bill 2018 passed the Senate too which 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.

Legislation outstanding

Tax legislation still to be finalised in parliament includes:

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 amend 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 the Bill moved to the House for debate.

  1. 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;
  2. 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. The ATO has recently released guidance on how they will administer the proposed changes before the law is passed.
  • 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, 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 includes 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; includes 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.

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