INFORMATION FOR CORPORATES

Limited indirect tax measures announced, although welcome relief for certain North Macedonia, Latvia and Saudi Arabia diplomatic representatives.

The Government will increase the tobacco excise by 5% per year from 1 September 2023. This increase is in addition to the ordinary indexation. The Government is also aligning the tax treatment of tobacco products subject to the per kilogram excise and excise-equivalent customs duty (roll-your-own tobacco) with the manufactured per-stick rate.

The amendment of the start date from 1 July 2023 to 1 July 2024 to streamline the excise administration for fuel and alcohol applies to the following measures:

• Remove overlapping Australian Border Force and ATO systems.
• Streamline licence applications and renewal requirements.
• Remove regulatory barriers for excise and excise equivalent customs goods, including lubricants, bunker fuels for commercial shipping industries and vapour recovery units.
• The ATO will publish on its website a public register of entities which hold excise licences to store or manufacture excise and excise equivalent customs goods, from 1 July 2024. 
   

Additional funding to the ATO over four years to continue the activities that promote GST compliance. The ATO plans to develop more sophisticated analytical tools to combat emerging risks to the GST system.

The increase of the Heavy Vehicle Road User Charge rate with 6% per year over three years from 27.2 cents per litre to 32.4 cents per litre by 2025-26. There is no proposed increase for 2022-23.

Finally, the Government has expanded access to refunds of indirect tax (including GST, fuel, and alcohol taxes) under the Indirect Tax Concession Scheme to the diplomatic and consular representatives of North Macedonia and Latvia. This extends to construction and renovation relating to current and future diplomatic missions and consular posts. For Saudi Arabia, they will have Indirect Tax Concession Scheme access to upgrade the Embassy and current and future Consulate-General.
 

Global Minimum Tax Rate

Australia has now confirmed its implementation start date, for enacting key aspects of Pillar Two of the OECD/G20 Two-Pillar Solution pertaining to the digital economy.      

 

This is a globally co-ordinated project, which more than 130 jurisdictions are moving forward with. 

 

The proposed measures, which generally apply to large global groups with revenues of more than EUR 750m (approximately AUD$1.2b), include:    

• a 15% global minimum tax for large multinational enterprises with the “Income Inclusion Rule”, applying to income years starting on or after 1 January 2024 (and the Undertaxed Profits Rule applying to income years starting on or after 1 January 2025); and
• a 15% domestic minimum tax applying to income years starting on or after 1 January 2024 – which will give Australia “first claim” on applying the global minimum top-up tax on Australian profits.

The measures will be based on the OECD’s Global Anti-Base Erosion Model rules – this instance where Australia is adhering to a global framework constitutes a welcome reversal of some recent trends, where the Government (including the former administration on many occasions) has taken its own path in implementing global measures.

The legislation that is to be enacted to effect this change will be complex and it will be a significant task for Treasury to draft. It will warrant close attention and scrutiny when it is released, presumably for public consultation.

There is expected to be a plenitude of other jurisdictions which will similarly follow suit, with 2024 the most likely start date for the majority of such jurisdictions. Certain lower-taxed jurisdictions are increasing their domestic tax regimes in response to this global development, such as Ireland, which is proposing to increase its base 12.5% tax rate to 15%.

Interestingly, the measures only forecast additional revenue for the Australian Government of $160m in 2025-26, and $210m in 2026-27.

General Anti-Avoidance Rule

The Government will seek to strengthen and improve the integrity of the tax system by expanding the already far-reaching scope of the general anti-avoidance provisions in Part IVA of the ITAA 1936. The expanded scope will apply to:

• Schemes which reduce tax paid in Australia by accessing lower withholding tax rates on income paid to foreign residents. Currently, Part IVA of the ITAA 1936 defines a tax benefit (relating to withholding taxes) as a taxpayer “not being liable to pay withholding tax” and previously did not address schemes where a tax benefit was obtained through lower rates of withholding tax.
• Schemes that achieve an Australian income tax benefit, even where the dominant purpose was to reduce foreign income tax. Currently, instances where the dominant purpose of a scheme was to obtain a foreign tax benefit, are not addressed by Part IVA of the ITAA 1936. 

The changes will apply to income years commencing on or after 1 July 2024 irrespective of whether the scheme was entered into before the aforementioned date.        
The monetary effects of this measure have been determined to be unquantifiable.        

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