There have been minimal changes in the international tax space, with the relevant changes focusing on reducing complexity and uncertainty as well as expanding the international tax treaty network.
Corporate residency
- Under changes announced to apply from 1 July 2021, a company incorporated offshore will be treated as an Australia tax resident where it has a 'significant economic connection to Australia'. This requirement will now be satisfied where both of the following are in Australia:
- its core commercial activities; and
- central management and control.
- The current test focuses on the location of an offshore company's central management and control only. The amendments clarify the corporate residency test to reflect the position prior to the 2016 High Court decision of Bywater Investments Ltd v Federal Commissioner of Taxation.
Tax treaty network
- The Government intends to modernise and expand its tax treaty network to eliminate double taxation, settle taxing rights between Australia and other countries and attract foreign investment and skilled workers.
- The specific details of this modernisation and expansion are yet to be detailed.
Exchange of Information Jurisdictions
- The jurisdictions that have information sharing agreements with Australia has been updated to include the Dominican Republic, Ecuador, El Salvador, Hong Kong, Jamaica, Kuwait, Morocco, North Macedonia and Serbia, and remove Kenya from the existing 122 jurisdictions on the list.
- Residents of listed jurisdictions are eligible to access the concessional managed investment trust withholding tax rate of 15% on certain distributions (instead of the general rate of 30%).
Hybrid Mismatch Rules
- The Government has amended Australia's hybrid mismatch rules to assist compliance with the rules, further details of these amendments can be found in our tax alert.
Revised Start Dates for Tax Measures
- As previously announced, the start date for the 2018-2019 Budget measure "Tax Integrity – removing the capital gains discount at the trust level for Managed Investment Trusts (MITs) and Attribution MITs" has been revised from 1 July 2020 to the income year commencing on or after three months after the date of Royal Assent of the relevant legislation. It is not yet clear when the draft legislation will be published.
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