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Late last year, the High Court handed down its decision in Commissioner of Taxation v Australian Building Systems Pty Ltd (in liq)  HCA 48. The ATO has recently issued a Decision Impact Statement (DIS) setting out its view of the consequences of the High Court's decision.
On 13 November 2015 the Treasurer and Minister of Finance jointly announced that a new double tax treaty had been negotiated with Germany, replacing the 1972 agreement. The text of the new treaty evidences Australia's Treaty policy response to recommendations made by the OECD as part of the base erosion and profit shifting (BEPS) project. In this Alert we summarise the BEPS treaty proposals made by the OECD, and draw attention to Australia's response as evidenced in the new Australia/Germany Double Tax Treaty.
The High Court's decision in Commissioner of Taxation v Australian Building Systems Pty Ltd (in liq) held that, in the absence of an assessment, a liquidator is not required to retain funds from asset sale proceeds in order to meet a tax liability which could become payable as a result of a capital gain made on the sale. In doing so, the majority of the High Court affirmed the decision of the Full Federal Court and provided long awaited guidance to liquidators, receivers and administrators.
The Federal Government continues in its implementation of the reforms to Australia's foreign investment regime. The relevant Bills have been introduced into Parliament and a report on them has been handed down by the Senate Economics Committee.
The Chevron case (Chevron Australia Holdings Pty Ltd (CAHPL) v Commissioner of Taxation) concerned the transfer pricing implications of a Credit Facility Agreement between CAHPL and Chevron Funding Corporation Inc, a Delaware based, wholly owned subsidiary of CAHPL. The central issue in the case was whether interest charged by CFC to CAHPL under the Credit Facility exceeded the arm's length amount.
On 5 October 2015 the OECD issued its final paper on BEPS Action 12 Mandatory Disclosure Rules, Action 12 - 2015 Final Report (Paper). In this Alert we highlight the main issues and recommendations for taxation reform raised in the Paper.
The Australian Treasurer's BEPS Press Release on 6 October 2015 noted that the ATO is considering the costs and benefits for Australia of the mandatory disclosure rules recommended in the Paper. This is an area that may well result in reform in Australia potentially leading to further tax reporting for Australian taxpayers. For risk governance purposes, Boards should keep aware of the ATO's recommendations in relation to this Paper.
Action 4 addressed the use of excessive interest deductions on debt to related and third parties. The OECD recommended a new best practice rule to prevent base erosion and profit shifting. The recommended approach would cap interest deductions based on a fixed ratio to EBITDA. Relief would be provided to highly geared groups through a worldwide gearing test.
This is a marked difference to Australia's recently amended thin capitalisation rules, which operate based on a fixed debt/equity ratio. Any amendments to the thin capitalisation rules or interest deductibility rules will impact funding arrangements, as well as highly leveraged groups, including banking and finance providers and infrastructure entities.
This Alert focuses on Action 2 – Hybrid Mismatches, dealing with the OECD's proposals to neutralize tax benefits associated with instruments and entities which result in tax deductions in one jurisdiction and tax exemptions in another. The OECD's recommendations will lead to international action as well as domestic tax law changes, with Australia demonstrating its willingness to move early in implementing changes. For effective tax risk governance, it is important for multinational Boards to be aware of and to proactively respond to the OECD's recommendations.
On 5 October 2015, the OECD issued its final papers for each action item in the Base Erosion and Profit Shifting (BEPS) project. The OECD's recommendations will lead to international action as well as domestic tax law changes. For effective tax risk governance, it is important for multinational Boards to be aware of and to proactively respond to the OECD's recommendations.
The Australian Energy Market Commission (AEMC) has published a draft proposal to change the rules that govern rebidding in the national electricity market. The proposed amendments would replace the existing rule which requires offers, bids and rebids to be made in good faith, with a new rule that prohibits offers, bids and rebids that are false, misleading or likely to mislead; and require rebids to be made as soon as practicable after a generator or market participant becomes aware of the change in material conditions or circumstances that has prompted the rebid.
Does the decision in Caason Investments Pty Ltd & Anor v Simon Cao & Others (Caason) make it the test case in Australian law for market-based causation? Dispute Resolution partners Beverley Newbold and Ross Freeman consider the decision handed down by the Full Federal Court and how it opens the door to the adoption of market-based causation in Australia.
Recent amendments to extend the profits tax exemption for offshore funds to private equity funds is a proactive move by the Hong Kong Government to encourage private equity fund managers to set up new, and expand existing, businesses in Hong Kong.
Private equity managers can now perform more asset management activities in Hong Kong without the risk of their offshore private equity funds incurring a Hong Kong profits tax liability, although they still need to keep in mind the licensing implications of increasing management activity conducted in Hong Kong.
The interim report on corporate tax avoidance, released on 17 August 2015, made 17 recommendations in relation to evidence of tax avoidance, multilateral efforts to combat avoidance, the potential for unilateral action by Australia and the capacity of Australian Government agencies to collect corporate tax. The final report, which is due on 30 November 2015 will focus on transfer pricing with a secondary focus on excessive debt loading, P.E.s, exemptions from general purpose accounting requirements and the role of private accounting firms in tax avoidance.
The OECD has released a revised discussion draft of BEPS Action 7: Preventing the Artificial Avoidance of permanent establishment Status (Paper), which addresses Action 7 of the OECD's Base Erosion and Profit Shifting (BEPS) Action Plan. In this Alert we highlight the major changes proposed in the Paper, and provide our comment on the potential impact of those changes.
The rules have been released that govern the new Significant Investor Visa (SIV) regime and introduce the Premium Investor Visa (PIV) regime. The new rules came into effect on 1 July 2015.
On 3 April 2015 the OECD issued a public discussion draft, Strengthening CFC Rules (Paper).
Austrade and the Department of Immigration and Border Protection (DIBP) have announced the new framework for complying investments for significant investor visa (SIV) and premium investor visa (PIV) applications to take effect on 1 July 2015.
China's State Council has issued plans for three new Pilot Free Trade Zones in Guangdong, Tianjin and Fujian, and the expansion of its Shanghai Pilot Free Trade Zone. It also updated its foreign investment negative list and announced trial procedures for national security review of foreign investment in all free trade zones. The expansion of China’s free trade zone program is set to advance the country’s financial reform journey and improve its ability to compete with more established rivals in the Asia-Pacific region.
The ASX has amended its Operating Rules to enhance disclosure requirements and facilitate the expansion of non-conventional exchange traded funds (ETFs), such as synthetic products and foreign collective investments, on ASX AQUA. Current and prospective issuers of ETFs and Managed Funds on ASX AQUA need to understand the new requirements and ensure compliance with them.
We consider the key tax issues affecting business announced in the Budget, including further details on major announcements including multinational anti-avoidance provisions and GST on digital products and services.