Today the Turnbull Government successfully legislated a new Diverted Profits Tax, which will prevent multinationals shifting profits made in Australia offshore to avoid paying tax.
The Diverted Profits Tax will commence on 1 July 2017, and is expected to raise $100 million in revenue a year from 2018-19. It 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.
This represents a significant step as the Turnbull Government continues to deliver on its commitment to ensure the integrity of our tax system.
The Diverted Profits Tax, announced in the 2016-17 Budget, targets multinationals that enter into arrangements to divert their Australian profits to offshore related parties in order to avoid paying Australian tax.
The Commissioner of Taxation will be provided with extra powers to achieve this.
This legislation will make it easier to apply Australia's anti‑avoidance provisions and a 40 per cent rate of tax, to be paid immediately.
It will also complement the application of the existing anti‑avoidance rules such as:
- the Multinational Anti-Avoidance Law (MAAL) to clamp down on artificial profit shifting by major multinationals;
- the introduction of a new Tax Avoidance Taskforce to crackdown on tax avoidance by multinationals and high wealth individuals
- new protections for whistle-blowers who disclose information about tax misconduct to the ATO and
- increased penalties for breach of tax reporting obligations for global companies with incomes of $1 billion or more.
The Diverted Profits Tax will not apply to managed investment trusts or similar foreign entities, sovereign wealth funds and foreign pension funds. These entities have been excluded as they are low risk from an integrity perspective, are widely held and undertake passive activities. This exclusion also ensures that such entities do not face an unnecessary compliance burden as a result of the introduction of the Diverted Profits Tax.
Similarly, the DPT will only apply to multinationals that have a global income of more than $1 billion and an Australian income of more than $25 million.
The integrity of Australia’s tax base is paramount. The Turnbull Government is determined to ensure multinationals do the right thing and pay their fair share of tax here in Australia so that Australian citizens get the money that is owed to them to fund vital infrastructure and services.