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Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017

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2016-2017

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Treasury LAWS Amendment (COMBATING MULTINATIONAL TAX AVOIDANCE) bill 2017

 

 

 

 

SUPPLEMENTARY EXPLANATORY MEMORANDUM

 

Amendments to be moved on behalf of the Government

 

 (Circulated by authority of the Treasurer, the Hon Scott Morrison MP)



Table of contents

Glossary.............................................................................................................. 1

General outline and financial impact............................................................ 3

Amendment to Schedule 1 to the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017........................................................................................ 5

 

 



 

The following abbreviations and acronyms are used throughout this supplementary explanatory memorandum.

Abbreviation

Definition

CFC

Controlled Foreign Companies

DPT

Diverted Profits Tax

ITAA 1936

Income Tax Assessment Act 1936



 

Amendment to Schedule 1 to the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017

The amendment to Schedule 1 to the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017 clarifies the interaction between the controlled foreign companies (CFC) rules in Part X of the Income Tax Assessment Act 1936 (ITAA 1936) and the Diverted Profits Tax (DPT).

Date of effect: The amendment applies in relation to tax benefits for an income year that starts on or after 1 July 2017 (whether or not the tax benefits arises in connection with a scheme that was entered into, or was commenced to be carried out, before 1 July 2017). 

Proposal announced: Not previously announced.

Financial impact : Nil .

Compliance cost impact : The amendment has no additional compliance cost impact.

 



 

Outline of chapter

1.1                   The amendment to Schedule 1 to the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017 (the Bill) clarifies the interaction between the CFC rules in Part X of the ITAA 1936 and the DPT.

Detailed explanation of new law

Amendment to Schedule 1 to the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017

1.2                   Amendment 1 clarifies that where an amount of attributable income is included in the assessable income of the relevant taxpayer (or an associate of the relevant taxpayer) due to the operation of the CFC rules, then that amount reduces the relevant taxpayer’s DPT tax benefit.

1.3                   The DPT tax benefit is only reduced to the extent that the amount is included in assessable income as a result of the scheme and is directly referable to the DPT tax benefit. [Amendment 1, subsections 177J(6) and (6A) of the ITAA 1936]

1.4                   The amendment ensures that, for example, the reduction to the relevant taxpayer’s DPT tax benefit is calculated correctly in situations where a partner in an Australian partnership, a beneficiary of an Australian trust or the trustee of an Australian trust is treated as having suffered a tax detriment for the purpose of section 460 of the ITAA 1936. In each of these cases, the decrease in the taxpayer’s DPT tax benefit does not include the amount of that tax detriment.