On 20.9.2018, the Government introduced the Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 was introduced in the House of Reps. It proposes a number of changes:

  • Non-concessional MIT income – amends the ITAA 1997, the ITAA 1936 and the TAA to improve the integrity of the income tax law for arrangements involving stapled structures and to limit access to tax concessions for foreign investors by increasing, to 30%, the MIT withholding rate on fund payments that are attributable to non-concessional MIT income. An amount of a fund payment will be non-concessional MIT income if it is attributable to income that is:
  • Thin capitalisation – amends the ITAA 1997 to improve the integrity of the income tax law by modifying the thin capitalisation rules to prevent double gearing structures. DATE OF EFFECT: The amendments would apply to income years starting on or after 1 July 2018.
  • Super funds for foreign residents withholding tax exemption – amends the ITAA 1936 to improve the integrity of the income tax law to limit access to tax concessions for foreign investors by limiting the withholding tax exemption for superannuation funds for foreign residents. DATE OF EFFECT: The amendments would apply from 1 July 2019. Transitional rules will apply to appropriately protect existing arrangements from the impact of the amendments.
  • Sovereign immunity – will amend the ITAA 1936 and the ITAA 1997 to improve the integrity of the income tax law to limit access to tax concessions for foreign investors by codifying and limiting the scope of the sovereign immunity tax exemption. The Income Tax Rates Amendment (Sovereign Entities) Bill 2018, introduced today, makes consequential amendments to the Income Tax Rates Act 1986 to specify that sovereign entities are liable to income tax on taxable income at a rate of 30%. DATE OF EFFECT: The amendments would apply from 1 July 2019. Transitional rules will apply to appropriately protect existing arrangements from the impact of the amendments.

The above 3 Bills have been referred to the Senate Economics Legislation Committee for inquiry and report by 9 November 2018.

FJM 21.9.18

[APH website: Bill Tracker, Bill, EM; LTN 182, 20/9/18; Tax Month – September 2018]

 

Comprehension questions (answers available)

  1. Is the date of effect, for the 30% withholding tax changes, on MIT ‘non-concessional income’, 1 July 2019?
  2. Is the date of effect, for the Thin Cap changes, on double gearing, 1 July 2019?
  3. Is the date of effect, to limit the withholding tax exemptions for superannuation funds, in relation to ‘foreign residents’, 1 July 2019?
  4. Is the date of effect, codifying and limiting the scope of the sovereign immunity tax exemption , 1 July 2019?

[Answers:1.yes;2.no(1.7.18);3.yes;4.yes]

 

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