Since our last newsletter Australia has had a Federal Election, with the Government retaining a slim majority. The election process has meant that until last week there had been no sittings of federal parliament and consequently no legislative change at the national level has occurred. There has, however, been some new guidance issued by the Australian Taxation Office (ATO), as well as some new law at the state level, that impacts international businesses and investors.
TRANSFER PRICING UPDATE
Fairer taxation of global businesses has continued to be the focus of many news stories. Australia’s national broadcaster, the ABC, recently released this short explanation of transfer pricing, describing an arrangement they have called “The Double Irish Dutch Sandwich”. As the video says, this arrangement and many others are legal.
The ATO has begun to issue guidance on its compliance approach to transfer pricing issues with the release of a draft discussion paper on offshore marketing hubs. Under the draft, the ATO proposes a 5-tier grading system prescribing which companies must tell the ATO of their marketing arrangements. At the low risk green level, companies can mark up costs by up to 100% and expect minimal compliance activity. This article in the Australian Financial Review explains the proposal in some detail.
Note that on 5 August 2016, the ATO announced that they are also reviewing offshore procurement hub arrangements. There is some information on their concerns on their website.
TAXPAYER ALERTS RELEVANT TO OVERSEAS BUSINESSES
The ATO have also recently released several taxpayer alerts in relation to international tax arrangements. Here are a few examples:
TA 2016/7 – is concerned with Australian tax consolidated groups with subsidiaries operating through offshore permanent establishments with intra group transactions, and whether those transactions reflect the economic substance of the arrangement.
TA 2016/8 – discusses the GST implications of arrangements entered into in response to the Multinational Anti-Avoidance Law.
TA 2016/9 – relates to incorrect calculation of the value of “debt capital” where a “debt interest” is treated as equity for accounting purposes.
To access more information on these alerts head to the ATO website.
FOREIGN PURCHASER SURCHARGE
The New South Wales state budget was handed down on 21 June 2016, with one of the new measures commencing from that date being a 4% surcharge purchaser duty on the purchase of residential real estate by foreign persons. This surcharge is in addition to the normal stamp duty payable on the purchase of residential property.
Foreign persons will also no longer be eligible for the 12 month deferral for the payment of stamp duty for off-the-plan purchases of residential property.
Note that Victoria and Queensland have also introduced similar rules, but the rates and details vary from state to state.
Further details can be found for each state on the links below:
FOREIGN RESIDENT CAPITAL GAINS TAX WITHHOLDING REGIME
Further to our April 2016 newsletter, the foreign resident capital gains tax withholding regime came into effect from 1 July 2016. You’ll find details on the regime here.
A NOTE FROM OUR PARTNERS
We have written this newsletter specifically for overseas advisers, with the aim of keeping you abreast of specific developments and changes that are occurring in Australia. These changes might effect your business, and some of your clients, so we hope that you find the articles interesting and useful.
If you would like further information about anything within this newsletter, please feel free to get in touch with Darren or Michael – their contact details are below.
I am happy to help you if there is anything from this newsletter that you need clarification on. Feel free to contact me me via email by clicking here.
As Stanley & Williamson’s Master of Tax, please feel free to contact me to discuss anything raised in this newsletter. You can send me an email by clicking here.
DOING BUSINESS IN AUSTRALIA
For general information on tax and other regulatory issues facing foreign business looking to trade in Australia, we have prepared a “Doing Business in Australia” document.
We hope that it is helpful, and would welcome any queries or feedback you may have. Click here if you’d like to read it.
Kreston Stanley Williamson Team
*Correct as of September 2016
*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under professional standards legislation.