The Treasury Laws Amendment (Tax Integrity and Other Measures No 2) Bill 2018 was:
- introduced in the House of Reps on Thursday, 24.5.2018 and was passed in that House on 25.6.2018.
- introduced into the Senate on 27.6.2018 and finally passed both Houses on 16.8.2018.
- Received Royal Assent as Act No. 84 of 2018 on 24.8.2018
The Act introduced the following.
- HYBRID MISMATCH RULES: amend the ITAA 1997 and ITAA 1936 to implement OECD BEPS hybrid mismatch rules as follows:
- Amend the ITAA 1997 to insert new Div 832 to implement part of the OECD hybrid mismatch rules by preventing entities that are liable to income tax in Australia from being able to avoid income taxation, or obtain a double non-taxation benefit, by exploiting differences between the tax treatment of entities and instruments across different countries. DATE OF EFFECT: The OECD hybrid mismatch rules will apply to income years starting on or after 1 January 2019. However, other than where an importing payment is made under a structured arrangement, the imported mismatch rule will apply to income years starting on or after 1 January 2020.
- Amend the ITAA 1936 to implement part of the OECD hybrid mismatch rules by limiting the scope of the exemption for foreign branch income and preventing a deduction from arising for payments made by an Australian branch of a foreign bank to its head office in some circumstances. DATE OF EFFECT: These amendments will apply to income years starting on or after 1 January 2019.
- Amend the ITAA 1997 to implement part of the OECD hybrid mismatch rules by: (i) denying imputation benefits on franked distributions made by an Australian corporate tax entity if all or part of the distribution gives rise to a foreign income tax deduction; and (ii) preventing certain foreign equity distributions received, directly or indirectly, by an Australian corporate tax entity from being non-assessable non-exempt (NANE) income if all or part of the distribution gives rise to a foreign income tax deduction. DATE OF EFFECT: Subject to transitional rules for regulatory capital of ADIs, general insurance companies and life insurance companies, the amendments to deny imputation benefits would apply in relation to distributions made on or after 1 January 2019. The amendments to make foreign equity distributions assessable would apply to foreign equity distributions made on or after 1 January 2019.
- FILM PRODUCER OFFSET: amend the ITAA 1997 to ensure that the producer offset is better targeted at supporting the Australian film industry when an offshore location is used for principal photography. DATE OF EFFECT: The amendment would apply to expenditure incurred in relation to films that commenced principal photography on or after 1 July 2018.
- TAX EXEMPTION RE World Twenty20 CRICKET: amend the ITAA 1997 and the ITAA 1936 to provide an income tax exemption for the IBC (ICC Business Corporation) and to exempt from withholding tax payments of interest, dividend and royalties made to the IBC. This would provide support to the International Cricket Council staging the ICC World Twenty20 in Australia in 2020. DATE OF EFFECT: The measure would apply to assessable income derived on and from 1 July 2018 and to interest, dividend and royalty withholding tax liabilities arising on and from 1 July 2018.
- DGRs: amend the ITAA 1997 to list Melbourne Korean War Memorial Committee Incorporated as a DGR under the income tax law. DATE OF EFFECT: The amendment would apply to gifts made to Melbourne Korean War Memorial Committee Incorporated between 1 January 2018 and 31 December 2019 inclusive.
Study questions (answers available)
- Is it Div 876 (of the ITAA 1997) that the Act introduces, to deal with the ‘Hybrid Mismatch’ issues?
- Is one of the objectives of the ‘Hybrid Mismatch Rules’ to avoid ‘double non-tax’ effect?
- Do the Australian rules operate earlier than the OECD rules?
- Do all the Australian measures start on 1 Jan 2019?
- Do franking credit benefits be reduced in some circumstances?
- Does the Act some tax exemption to income from the ICC World Twenty20 cricket competition, to be held in Australia, in 2020?