The Federal Government is acting to improve the integrity and operation of the business tax system by introducing legislation to close loopholes in the tax consolidation regime that create unintended tax outcomes, Minister for Revenue and Financial Services, Kelly O’Dwyer has announced.
According to Minister O’Dwyer, the tax consolidation regime, in allowing wholly-owned corporate groups to be treated as a single entity for tax purposes, reduces compliance costs for business and improve the integrity of the tax system; however, she said multinational consolidated groups can, in some circumstances, “achieve tax free gains on assets by transferring entities between non-resident associates”.
“The [Treasury Laws Amendment (Income Tax Consolidation Integrity) Bill 2018] will improve the integrity of the consolidation regime by preventing multinational groups from sheltering future income tax by ‘churning’ entities between related parties,” Minister O’Dwyer said. “This will ensure that these multinational groups pay the right amount of tax on gains from their Australian assets.
In addition, she said the Bill will improve the integrity and operation of the consolidation rules by:
- removing a double tax benefit arising from the treatment of deductible liabilities,
- simplifying the rules by disregarding deferred tax liabilities,
- preventing double benefits from arising from securitised assets,
- ensuring the tax treatment of certain assets and liabilities is consistent with economic substance, and
- closing a loophole allowing access to double deductions by shifting value across entities.
“The changes in this Bill implement recommendations made by the Board of Taxation in its post-implementation reviews of the consolidation regime,” Minister O’Dwyer said.
“The Government has consulted extensively on these measures, including as part of the Board of Taxation reviews. The Government has listened carefully to stakeholders in the design of these changes to ensure they are fair and balanced.
“These new laws will secure more revenue for our community, helping to guarantee infrastructure and essential services across Australia.”