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Australia Delays Action On Stapled Structures

Tuesday, May 2, 2017

The Australian Government has decided to extend a review into the taxation of stapled structures. It will not tackle the issue at the upcoming Budget.

According to the Treasury, stapled structures are created when "two or more securities are contractually bound together, such that they are not able to be bought or sold separately."

In March, the Government launched a consultation on the tax consequences of the re-characterization of trading income derived through the use of stapled structures. The aim was to understand how Australia's tax system may have contributed to the use of such structures.

On May 2, Treasurer Scott Morrison announced that the timeline for the review will be extended to the end of July.

He said: "Recognizing the economic significance of stapled structures in the Australian economy and that this is a complex and sensitive issue, the Government will not be responding to the issue in the Budget. This will allow more time to formulate relevant options that minimize unintended consequences."

Morrison added that he has asked his Department to continue to work with stakeholders on the best approach to dealing with the issue.

The consultation document outlined a number of policy options for removing the tax advantages of stapled arrangements. These included: disallowing certain deductions for cross-staple payments by companies or Division 6C trusts; taxing the recipient of such payments at a rate equivalent to the Australian company tax rate; or deeming stapled entities to be consolidated for tax purposes.