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Australia Consulting on Draft Legislation for Improving the Integrity of Stapled Structures — Orbitax Tax News & Alerts

The Australian Treasury has released for public comment draft legislation for improving the integrity of stapled structures. The draft legislation follows the release of the package of measures meant to address tax integrity concerns of stapled structures and the broader concessions available to foreign investors for passive income. The measures are included as part of the Budget 2018-19 ({News-2018-05-09/P/2-previous coverage}). The draft legislation includes measures:

  • Taxing trading income that is converted to passive income at the corporate tax rate;
  • Amending the thin capitalization rules to prevent foreign investors from using multiple layers of flow-through entities (i.e. trusts and partnerships) to ‘double gear’ their investments to generate more favorably taxed interest income;
  • Limiting the foreign pension fund withholding tax exemption for interest and dividends to portfolio investments only; and
  • Creating a legislative framework for the existing tax exemption for foreign governments (including sovereign wealth funds) and limiting the exemption to passive income from portfolio investments.

The draft legislation also includes:

  • The concession for new, Government-approved nationally significant infrastructure assets; and
  • Transitional arrangements for new and existing investments.

Click the following link for the consultation page, which includes the draft legislation and explanatory memorandum. The consultation period closes on 31 May 2018.