The Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018 was passed by the Senate on Thu 20.9.2018 and received Royal Assent on 3 October 2018 as Act No. 124 of 2018. It passed with 2 Opposition amendments to which the House of Reps agreed.
It contains the following previously-announced measures:
- Multinational anti-avoidance law (MAAL) – SCHEDULE 1 of this Act amends the ITAA 1936 to extend the application of the MAAL (s177DA) to capture the use of foreign trusts and partnerships in corporate structures, that may otherwise circumvent the law.
- DATE OF EFFECT: The amendments to MAAL apply from the commencement of the MAAL: 1 January 2016 (that is for an application of the MAAL, to a tax benefit’ arising after that date – which triggered the need to make a Part IVA adjustment, in the year in which it arose). However, the amendments can apply to ‘schemes’ entered into before that date (Item 3 of Schedule 1).
- Small business CGT concessions – SCHEDULE 2 of this Act amends the ITAA 1997 to include additional conditions that must be satisfied to apply the small business CGT concessions in Div 152 of the ITAA 1997.
The new conditions are intended to prevent the concessions from being inappropriately applied to interests in large businesses [EM para 2.12].
The amendments include additional ‘basic conditions’ that must be satisfied for a taxpayer to apply the CGT small business concessions, to a capital gain, arising in relation to a share in a company or an interest in a trust (the object entity). Broadly, the conditions require that:
- if the taxpayer does not satisfy the maximum net asset value test, then they must have carried on a business just before the CGT event;
- the object entity must either be a CGT small business entity or satisfy the maximum net asset value test (applying a modified rule about when entities are ‘connected with’ other entities), and
- the share or interest must satisfy a modified active asset test that looks through shares in companies and interests in trusts to the activities and assets of the underlying entities.
- Treasury issued draft legislation for these amendments, which I commented on, in some detail, in this Tax Technical Article. It appears that none of the objections, I mentioned, have been dealt with.
- DATE OF EFFECT: These amendments were going to apply to CGT events that occurred on or after 1 July 2017, until the Senate changed this to 8 February 2018 (which is when Treasury released the draft legislation for consultation).
- Fintech and venture capital – SCHEDULE 3 of this Act amends the ITAA 1997 to ensure that the venture capital investment tax concessions are available for investments in fintech businesses.
- It will do this by making 2 changes to reduce the scope of activities that are ineligible activities for the concessions for venture capital limited partnerships (VCLPs) and early stage venture capital partnership (ESVCPs).
- DATE OF EFFECT: 1 July 2018.
- Exempt from tax ‘reparation’ for Defence Force abuse (under the Defence Force Ombudsman Scheme) – SCHEDULE 4 of this Act amends the ITAA 1997, to exempt from income tax payments received from the Commonwealth as reparation for abuse by Defence Force personnel.
- DATE OF EFFECT: 2017-18 income year and later years.
The 2 Opposition amendments, were:
- To change the date of effect of the additional conditions applying to the CGT small business concessions from 1 July 2017 to 8 February 2018 (when draft legislation was released for comment).
- To require the Government to conduct an impact assessment of the operation of the venture capital investment tax concessions in fintech businesses.
Comprehension questions (answers available)
- Has the MAAL been changed to catch foreign trusts and partnerships, as well?
- Does this change apply from 1 July 2019?
- Have the ‘Small Business CGT concessions’ been changed, for the sale of shares or interests in trusts, by adding extra conditions?
- Is it now a requirement that either the ‘taxpayer’ or the ‘object entity’ must carry on business just before the CGT event?
- Does the ‘active asset test’ remain unchanged?
- Will these CGT changes be backdated to 1 July 2017 (the beginning of the next year after the May 2017 Budget, when they were announced)?
- Is ‘reparation’ for abuse in the Defence Forces now exempt from tax?
- Is this from the current 2018/19 financial year?