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Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013

Schedule 1 General anti-avoidance rules

   

Income Tax Assessment Act 1936

1  Paragraph 45B(8)(k)

Omit “subparagraphs 177D(b)(i) to (viii)”, substitute “subsection 177D(2)”.

2  At the end of paragraph 177C(1)(bb)

Add “or”.

3  After paragraph 177C(1)(bb)

Insert:

                   (bc)  the taxpayer not being liable to pay withholding tax on an amount where the taxpayer either would have, or might reasonably be expected to have, been liable to pay withholding tax on the amount if the scheme had not been entered into or carried out;

4  At the end of subsection 177C(1)

Add:

             ; and (g)  in a case to which paragraph (bc) applies—the amount referred to in that paragraph.

5  Sections 177CA and 177D

Repeal the sections, substitute:

177CB   The bases for identifying tax benefits

             (1)  This section applies to deciding, under section 177C, whether any of the following ( tax effects ) would have occurred, or might reasonably be expected to have occurred, if a scheme had not been entered into or carried out:

                     (a)  an amount being included in the assessable income of the taxpayer;

                     (b)  the whole or a part of a deduction not being allowable to the taxpayer;

                     (c)  the whole or a part of a capital loss not being incurred by the taxpayer;

                     (d)  the whole or a part of a foreign income tax offset not being allowable to the taxpayer;

                     (e)  the taxpayer being liable to pay withholding tax on an amount.

             (2)  A decision that a tax effect would have occurred if the scheme had not been entered into or carried out must be based on a postulate that comprises only the events or circumstances that actually happened or existed (other than those that form part of the scheme).

             (3)  A decision that a tax effect might reasonably be expected to have occurred if the scheme had not been entered into or carried out must be based on a postulate that is a reasonable alternative to entering into or carrying out the scheme.

             (4)  In determining for the purposes of subsection (3) whether a postulate is such a reasonable alternative:

                     (a)  have particular regard to:

                              (i)  the substance of the scheme; and

                             (ii)  any result or consequence for the taxpayer that is or would be achieved by the scheme (other than a result in relation to the operation of this Act); but

                     (b)  disregard any result in relation to the operation of this Act that would be achieved by the postulate for any person (whether or not a party to the scheme).

177D   Schemes to which this Part applies

Scheme for purpose of obtaining a tax benefit

             (1)  This Part applies to a scheme if it would be concluded (having regard to the matters in subsection (2)) that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for the purpose of:

                     (a)  enabling a taxpayer (a relevant taxpayer ) to obtain a tax benefit in connection with the scheme; or

                     (b)  enabling the relevant taxpayer and another taxpayer (or other taxpayers) each to obtain a tax benefit in connection with the scheme;

whether or not that person who entered into or carried out the scheme or any part of the scheme is the relevant taxpayer or is the other taxpayer or one of the other taxpayers.

Have regard to certain matters

             (2)  For the purpose of subsection (1), have regard to the following matters:

                     (a)  the manner in which the scheme was entered into or carried out;

                     (b)  the form and substance of the scheme;

                     (c)  the time at which the scheme was entered into and the length of the period during which the scheme was carried out;

                     (d)  the result in relation to the operation of this Act that, but for this Part, would be achieved by the scheme;

                     (e)  any change in the financial position of the relevant taxpayer that has resulted, will result, or may reasonably be expected to result, from the scheme;

                      (f)  any change in the financial position of any person who has, or has had, any connection (whether of a business, family or other nature) with the relevant taxpayer, being a change that has resulted, will result or may reasonably be expected to result, from the scheme;

                     (g)  any other consequence for the relevant taxpayer, or for any person referred to in paragraph (f), of the scheme having been entered into or carried out;

                     (h)  the nature of any connection (whether of a business, family or other nature) between the relevant taxpayer and any person referred to in paragraph (f).

Note:          Section 960-255 of the Income Tax Assessment Act 1997 may be relevant to determining family relationships for the purposes of paragraphs (f) and (h).

Tax benefit

             (3)  Despite subsection (1), this Part applies to the scheme only if the relevant taxpayer has obtained, or would but for section 177F obtain, a tax benefit in connection with the scheme.

When schemes entered into etc.

             (4)  Despite subsection (1), this Part applies to the scheme only if:

                     (a)  the scheme has been or is entered into after 27 May 1981; or

                     (b)  the scheme has been or is carried out or commenced to be carried out after that day (and is not a scheme that was entered into on or before that day).

Schemes outside Australia

             (5)  This section applies whether or not the scheme has been or is entered into or carried out in Australia or outside Australia or partly in Australia and partly outside Australia.

6  Paragraphs 177EA(17)(j) and 177EB(10)(f)

Omit “subparagraphs 177D(b)(i) to (viii)”, substitute “subsection 177D(2)”.

7  Subsection 177F(1)

Omit “a tax benefit has been obtained, or would but for this section be obtained, by a taxpayer in connection with a scheme to which this Part applies,”, substitute “this Part applies to a scheme in connection with which a tax benefit has been obtained, or would but for this section be obtained,”.

8  Subsection 177F(2A)

Omit “section 177CA”, substitute “paragraph 177C(1)(bc)”.

Taxation Administration Act 1953

9  Paragraph 18-40(1)(a) in Schedule 1

Omit “section 177CA”, substitute “paragraph 177C(1)(bc)”.

10  Application

The amendments made by this Schedule apply in relation to all schemes except schemes that were entered into, or that were commenced to be carried out, on or before 15 November 2012.