The Australian Taxation Office (ATO) on November 22 released guidance on a proposed antiavoidance law being considered by Parliament that is designed to combat the use of artificial or contrived arrangements by multinationals to avoid attribution of profits to Australian permanent establishments. Also, Australia’s Board of Taxation has initiated a consultation on the implementation of the final anti-hybrid rules released by the OECD and G20 under action 2 of the base erosion profit shifting plan.
The ATO tax guidance addresses Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015, which, if passed, will become effective January 1 and will affect about 80 large multinational enterprises. If the law is passed without change, the ATO guidance will become a public ruling.
The ATO said it would like to initiate an early dialogue with all taxpayers that may fall within the ambit of the antiavoidance rules, and urged firms to contact the ATO to discuss the law, including the possibility of restructuring existing arrangements to comply with the law.
Included in the guidance is a discussion of the antiavoidance law’s principal purpose test, including the implications when a taxpayer has the combined purpose of obtaining an Australian tax benefit and reducing or deferring a foreign tax liability; a discussion of how to determine the amount of the tax benefit of a scheme captured by the measure; the possibility of compensating adjustments; and examples of high-risk and low-risk scenarios.
The consultation on implementation of the OECD/G20 anti-hybrid rules, brought by Australia’s Board of Taxation on November 20, seeks feedback on how Australia can eliminate the tax advantage from the use of hybrid instruments or entities while also ensuring that investment activity is not compromised and Australia remains an economically competitive place to do business. Feedback is requested by January 15, 2016.
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