On 20 September 2018, Australia's Assistant Treasurer introduced a large number of tax Bills into Parliament. The tax bills contain measures previously announced.

Broadly, the Bills implement the following major initiatives:

• Research and Development (R&D) tax incentive: changing the incentive including the new R&D intensity test for larger claimants - operative from 1 July 2018
• Thin capitalization: eliminating the ability for thin capitalization purposes to make asset revaluations which are not reflected in financial statements – applies from 1 July 2019, but also impacts valuations which were not completed by Budget night. The Bill also classifies non-authorized deposit-taking institution (ADI) which are foreign controlled tax consolidated groups as both outward investing and inward investing entities.
• Stapled structures and other non-concessional Managed Investment Trust (MIT) income: will be subject to 30% foreign resident withholding tax and related foreign investor changes from 1 July 2019
• MIT and Attribution MIT (AMIT) technical amendments: a separate Global Tax Alert will be issued on these amendments
• Significant global entity (SGE): amending the definition from 1 July 2018 to apply to groups in the same way as for groups headed by a listed company. Broadly, SGEs are subject to Australia's multinational anti-avoidance law, diverted profits tax, country-by-country reporting, filing of general purpose financial statements and also significantly increased penalties (a transitional measure adjusts the penalties application)
• Goods and Services Tax (GST) on online hotel bookings by offshore suppliers: suppliers will be required to include these in their GST turnover – for sales on or after 1 July 2019
• Black economy changes - broadly effective from 1 July 2019 - to:
  • Remove tax deductibility for payments to employees and contractors, if withholding obligations have not been complied with
  • Expand the taxable payment reporting system to road freight, information technology and security and investigation services entities engaging other entities to undertake those services for them

There appear to be no major policy revisions compared with earlier drafts.

Businesses will need to factor the Bills into their tax compliance, withholdings and recording systems.

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Australia), Sydney

• Tony Cooper
  tony.cooper@au.ey.com
• Sean Monahan
  sean.monahan@au.ey.com

Ernst & Young LLP, Australian Tax Desk, New York

• David Burns
  david.burns1@ey.com

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PDF version of this Tax Alert