Monday, March 27, 2017
The Australian Senate has passed legislation to introduce a diverted profits tax (DPT) from July 1, 2017.
The DPT will impose a 40 percent penalty tax on profits that have been "artificially diverted" from Australia by multinationals. The penalty tax must be paid immediately.
In a joint media release, Treasurer Scott Morrison and Revenue Minister Kelly O'Dwyer said the DPT "provides a powerful new tool for the Australian Taxation Office to tackle contrived arrangements and uncooperative taxpayers, and will reinforce Australia's position as having some of the toughest laws in the world to combat multinational tax avoidance." They expect the DPT to raise AUD100m (USD76.3m) in revenue a year from 2018-19.
The DPT will target entities with global income of AUD1bn or more and Australian income of more than AUD25m that shift profits to offshore associates where: the resulting increase in the foreign tax liability is less than 80 percent of the corresponding decrease in the Australian tax liability; there is insufficient economic substance; and one of the "principal purposes" is to obtain a tax benefit.
The DPT will not apply to managed investment trusts or similar foreign entities, sovereign wealth funds, or foreign pension funds.