Australia: Proposed legislation on new thin capitalisation rules; other tax-related legislation

Update on tax-related legislation

Update on tax-related legislation

The federal government introduced proposed legislation into the House of Representatives including the new thin capitalisation rules, as well as requirements for public companies to disclose information about subsidiaries and thin capitalisation.

The Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023:

  • Limits the amount of debt deductions certain multinational entities can claim in an income year: The new thin capitalisation rules seek to align with the OECD’s earnings-based best practice model which allows an entity to deduct net interest expense up to a benchmark earnings ratio
  • Introduces new rules on the disclosure of information about subsidiaries: For financial years commencing on or after 1 July 2023, Australian public companies (listed and unlisted) must disclose information about subsidiaries in their annual financial reports.

Other tax-related legislation

In addition, the “Treasury Laws Amendment (2022 Measures No. 4) Bill 2022”—which passed both Houses of Parliament on 21 June 2023:

  • Provides for a 30% refundable tax offset for the development of digital games in Australia
  • Clarifies that certain digital currencies continue to be excluded from the income tax treatment of foreign currency
  • Enables the commissioner to determine alternative records which may be kept and retained by employers for fringe benefit tax record keeping purposes
  • Provides for temporary measures allowing certain small businesses to access 20% bonus deductions for eligible expenditure incurred on external training for employees, and expenses and depreciating assets for the purpose of digitising operations
  • Extends existing reporting and auditing requirements to registerable superannuation entities
  • Amends the definition of “responsible ministers” and specifies that the minister administering the Act is also the nominated minister unless determined otherwise in writing
  • Credits the Clean Energy Finance Corporation (CEFC) Special Account with $11.5 billion* after commencement of the amendments and amends additional amounts to be credited to the CEFC Special Account through additional appropriations of the Parliament
  • Amends the definition of “superannuation income stream”
  • Provides a non-refundable tax offset for certain members of the Military Superannuation Benefits Scheme and Defense Force Retirement and Death Benefits Scheme; and specifies eligibility criteria and a framework for a veterans’ superannuation (invalidity pension) tax offset

The bill now awaits Royal Assent.

*$=Australian dollar

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