Question:
Tax Office continues chasing away foreign investment
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
In a new episode of the Tax Office/Myer float saga, the Federal Court granted orders for the Tax Office to serve a demand for $739 million on an Australian Director, Ben Gray, after the Tax Office made out a case that he was the local representative of a Dutch and Cayman Islands companies in the TPG group.
In 2006, a US-based private equity firm by the name of TPG bought the Myer business from the then public listed
Coles Myer Ltd (Coles Myer was later taken over by Wesfarmers). TPG improved the Myer business and then arranged to float the business two years ago at a very substantial gain. Shortly after the float, the Tax Office took court action to freeze the relevant TPG group bank accounts but was too late as the sale proceeds had been transferred overseas shortly before.
TPG had the following structure in place for the Myer deal:
+ An Australian company, NB Flinders, bought the Myer business from Coles Myer Ltd (Mr Gray was the director of NB Flinders);
+ It was owned by a Dutch company called NB Swanston;
+ The Dutch company, in turn was owned by NB Queen Sari, based out of Luxembourg; and
+ The Luxembourg domiciled company was owned by TPG Newbridge Myer based in the Cayman Islands.
The Tax Office alleged that TPG was treaty shopping; that they set up the structure for no other reason but to take advantage of the loopholes in double tax agreements between the relevant countries. They argue that, where there is treaty shopping, the Australian antiavoidance rules can be used to essentially ignore the Dutch and Luxembourg interposed companies and apply tax on TPG Newbridge Myer based in the Cayman Islands. There is no double tax agreement between Australia and the Cayman Islands and tax would apply in Australia to the Myer float deal if the shareholding was directly between the Australian and Cayman Islands TPG companies.
The Tax Office issued two determinations last year based on this case.
Peter Norman, tax partner at Norton Rose said … With the ATO taking this sort of action, Australia may not look like the most tax-friendly place in which to invest so far as foreign investors are concerned.
The Tax Office demand is comprised of $452 million in tax, $226 million in penalties and $60 million interest.
Financial Review, 24 August 2011, pp 1-8
