Australia's 2015 Budget Introduces Measures to Curb BEP | KPMG | CA

Australia's 2015 Budget Introduces Measures to Curb BEPS

Australia's 2015 Budget Introduces Measures to Curb BEP

Global Tax Advisor, May 19, 2015. In its 2015 budget Australia introduced measures to counter base erosion and profit shifting.

1000

Related content

In its 2015 budget Australia introduced measures to counter base erosion and profit shifting (BEPS) (i.e., measures to combat "stateless" or low-taxed income earned from Australian sales).

The budget also contains measures to:

  • Adopt the OECD's new transfer pricing documentation requirements
  • Charge GST on all imported intangibles and services consumed by Australian resident end-users
  • Reduce the corporate income tax rate to 28.5% (from 30%) for small business entities only.

Multinational anti-avoidance legislation (BEPS)

The new anti-avoidance measures to combat low-taxed income earned from Australian sales will apply where the following criteria are met:

  • The foreign resident must have global sales in excess of AUD$1 billion in any year in which they obtain the tax benefit or reduce the relevant taxpayer's liabilities
  • The foreign resident derives income from a supply of goods or services to Australian customers with an Australian entity supporting that supply
  • The foreign resident is "connected with a no or low corporate tax jurisdiction" (either under the law of a foreign country or through preferential tax regimes)
  • The principal purpose (being less than a sole or dominant purpose) of the arrangement/structure is tax avoidance.

If the criteria are met, Australia can assess tax (including withholding tax) as if there was an Australian taxable presence. In addition, Australia could impose a fine of 100% of the unpaid tax, plus interest.

The measures, which modify Australia's existing anti-avoidance rules, will apply as of January 1, 2016 with no grandfathering of existing arrangements.

Transfer pricing documentation

Australia will adopt the OECD's new transfer pricing documentation requirements. Under the new rules, the Australian Taxation Office will receive the following information:

  • A country-by-country report disclosing information on the global activities of the multinational (including the location of its income and where its taxes are paid)
  • A master file containing an overview of the multinational's business and transfer pricing policies
  • A local file providing detailed information about the local taxpayer's intra-group transactions.

The measures will apply as of January 1, 2016 to companies with a global revenue of AUD$1 billion or more.

The budget proposes to double transfer pricing penalties to 50% (from 25%) when a taxpayer does not have a "reasonably arguable position".

GST on digital products and services offered by offshore suppliers

The budget introduces new measures to charge GST on all imported intangibles and services that Australian resident end-users consume. The measures will apply to intangibles, such as digital supplies (e.g., movie downloads, games), as well as services, such as consultancy and professional services. However, the measures will not apply to physical goods that are ordered online.

The measures will apply as of July 1, 2017.

Corporate tax rate reduction - Small business

The budget reduces the corporate income tax rate to 28.5% (from 30%) for small business entities (i.e., entities with sales of less than $2 million). The 30% franking credit rate (i.e., represents the tax a company pays on profits distributed as dividends) will remain unchanged for all companies.

The measure will apply as of July 1, 2015.

For more information, contact your KPMG adviser.

Information is current to May 19, 2015.

Connect with us

 

Request for proposal

 

Submit