Australia budget 2017 hits hybrid regulatory capital tax abuse, extends MAAL

In a further effort to curtail tax avoidance by multinationals, Australia will introduce hybrid mismatch provisions applicable to banks and insurance companies and tighten its multinational anti-avoidance law (MAAL), budget documents released May 9 said.

“We will continue our crackdown on multinationals not paying their fair share of tax,'” Australian Treasurer Scott Morrison assured.

New anti-hybrid mismatch rules will prevent multinational banks and insurance companies from double dipping by exploiting different tax treatments of their regulatory capital across borders, budget documents said.

The measure would be applicable January 1, 2018, or six months after Royal Assent of legislation.

The government previously announced it was considering the measure, which would prevent a tax deduction and another tax concession for a single payment.

Australia has already committed to the implementation of Action Item 2 of the G20/OECD base erosion profit shifting (BEPS) plan recommendations on neutralizing the effects of hybrid mismatch arrangements.

Budget 2017 & MAAL

Australia will also strengthen the integrity of Australia’s MAAL by ensuring corporate structures involving foreign partnerships or foreign trusts are subject to the law, budget document said. Such measures would be applicable from January 1, 2016.

The MAAL is designed to stop multinational groups operating in Australia from avoiding a taxable presence Australia by booking their profits offshore.

The ATO has previously warned about about transactions designed to thwart the MAAL that use partnerships in TA 2016/11, released September 15, 2016.

Morrison said that the ATO has already raised AUS $2.9 billion in additional tax this year from seven large multinational companies, and expects to raise over AUS $4 billion this financial year from large public companies and multinationals.

Other tax proposals in the budget include a major bank levy on banks with liabilities greater than AUS $100 billion, which would raise at least AUS $1.5 billion per year.

Also proposed is a Medicare levy, rules designed to improve the integrity of GST on property transactions, and the introduction of the Skilling Australians Fund levy to ensure that employers of foreign workers are investing in training Australians to meet future skills needs.

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