Australia Introduces Diverted Profits Tax Bill | KPMG | CA

Australia Introduces Diverted Profits Tax Bill

Australia Introduces Diverted Profits Tax Bill

A new Australian bill has introduced a 40% diverted profits tax.

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It will affect certain large entities carrying on business in Australia, and is expected to apply to income years beginning on or after July 1, 2017. The diverted profits tax will only apply to Australian resident entities or to the Australian permanent establishments of foreign entities (if the multinational group has an annual income of $1 billion or more). However, the tax will not apply if the Australian resident entity has revenue of less than $25 million, subject to some exceptions.

Several types of taxpayers may find themselves subject to the diverted profits tax, including:

  • Taxpayers involved in transfer pricing disputes with Australia 
  • Taxpayers with cross-border transactions which have not fully addressed the functional profile outside Australia 
  • Taxpayers who have undertaken business restructuring 
  • Taxpayers who have migrated intellectual property from Australia.

Other arrangements, including cross-border leasing and borrowing from 'cash boxes', may also potentially warrant consideration of the diverted profit tax. However, the following may be covered by a general exemption from the application of the new tax: managed investment trusts, collective investment vehicles, sovereign wealth funds, complying superannuation funds and foreign pension funds.

The proposed legislation is not retrospective. However, it does apply to arrangements that are in place upon commencement (i.e. it does not 'grandfather' any arrangements).

For more information, contact your KPMG adviser.

Information is current to February 28, 2017. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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