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  • Advice under development - international issues

    We are developing advice and guidance on the following international issues.

    [3708] Forex realisation event 4

    Title
    Draft Taxation Determination
    Income tax: does forex realisation event 4 happen to the debtor under subsection 775-55(1) of the Income Tax Assessment Act 1997 on repayment of a loan taken out prior to the effective date of a choice to use the applicable functional currency and denominated in the same non-Australian dollar currency that later becomes the applicable functional currency?

    Registered
    11 February 2015

    Purpose
    The draft Determination will set out proposed clarification on whether forex realisation event 4 happens on repayment of a loan obligation incurred prior to the effective date of an applicable functional currency choice and denominated in the same non-Australian dollar currency that later becomes the applicable functional currency.

    Expected completion
    To be advised

    Contact
    Walter Gianotti, Tax Counsel Network
    Phone: (08) 9268 5459
    Walter.Gianotti@ato.gov.au

    [3900] Related party financing – derivatives

    Title
    Final Schedule 2 to Practical Compliance Guideline PCG 2017/4
    Related party derivative financial arrangements

    Registered
    20 February 2017

    Purpose
    The final Schedule will set out the risk indicators associated with a financing arrangement, related transaction or contract entered into with cross-border related parties involving ‘derivatives’.

    Expected completion
    November 2019

    Comments
    Draft Schedule 2 to PCG 2017/4 published on 1 August 2018. Responses received during consultation have been considered.

    Contact
    PGIFinancing@ato.gov.au

    [3901] Related party financing – interest-free loans

    Title
    Draft Schedule 3 to Practical Compliance Guideline PCG 2017/4
    Interest-free loans between related parties

    Registered
    June 2016

    Purpose
    The draft Schedule will set out factors for determining whether an interest-free loan between related parties could be either debt or equity in identifying the arm’s length conditions.

    Expected completion
    November 2019

    Contact
    PGIFinancing@ato.gov.au

    [3906] Thin capitalisation – asset valuations

    Title
    Draft Practical Compliance Guideline
    ATO compliance approach to asset recognition, valuation and revaluation for thin capitalisation purposes

    Registered
    September 2017

    Purpose
    The draft Guideline will set out the ATO's proposed compliance approach to taxpayers’ recognition and valuation of assets for the purposes of the thin capitalisation regime in Division 820 of the Income Tax Assessment Act 1997.

    Expected completion
    To be advised

    Comments
    The Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Act 2019 was enacted in September 2019. Consideration is being given to whether this Guideline is still required.

    Contact
    PGIFinancing@ato.gov.au

    [3907] Thin capitalisation – mining rights recognition and revaluation

    Title
    Draft Taxation Determination
    Income tax: can a mining, quarrying or prospecting right be revalued in determining the safe harbour debt amount under Division 820 of the Income Tax Assessment Act 1997 (ITAA 1997)?

    Registered
    September 2017

    Purpose
    The draft Determination will set out the proposed ATO view relating to the classification and revaluation of a mining right in accordance with accounting standards when applying the thin capitalisation rules contained within Division 820 of the ITAA 1997.

    Expected completion
    To be advised

    Comments
    The Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Act 2019 was enacted during September 2019. Consideration is being given to whether this Determination is still required.

    Contact
    PGIFinancing@ato.gov.au

    [3908] Thin capitalisation – bifurcation of financial instruments

    Title
    Final Taxation Determination
    Income tax: thin capitalisation – valuation of debt capital for the purposes of Division 820

    Registered
    August 2016

    Purpose
    The final Determination will set out the ATO view relating to the valuation of a taxpayer’s debt capital in accordance with accounting standards when applying the thin capitalisation rules contained within Division 820 of the Income Tax Assessment Act 1997.

    Expected completion
    October 2019

    Comments
    Draft TD 2018/D4 published on 1 August 2018.

    Contact
    PGIFinancing@ato.gov.au

    [3909] Thin capitalisation – internally generated intangibles

    Title
    Draft Taxation Determination
    Can a taxpayer recognise and revalue their internally generated intangible asset in accordance with the accounting standards for the purpose of the thin capitalisation rules contained in Division 820 of the Income Tax Assessment Act 1997?

    Registered
    April 2016

    Purpose
    The draft Determination will set out the proposed ATO view relating to the recognition and revaluation of internally generated intangible assets in accordance with accounting standards when applying the thin capitalisation rules contained within Division 820 of the ITAA 1997.

    Expected completion
    To be advised

    Comments
    The provisions allowing recognition of these internally generated intangibles have been repealed by Parliament through the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Act 2019. Consideration is being given to whether this Determination is still required..

    Contact
    PGIFinancing@ato.gov.au

    [3910] Thin capitalisation – arm’s length debt test

    Title
    Final Taxation Ruling
    Income tax: thin capitalisation – the arm’s length debt test

    Registered
    July 2016

    Purpose
    The final Ruling will set out the ATO view on the application of the arm’s length debt test for the thin capitalisation regime.

    Expected completion
    To be advised

    Comments
    Draft Taxation Ruling TR 2019/D2 published on 5 April 2019. Comments period closed on 2 August 2019.

    Title
    Final Practical Compliance Guideline
    ATO compliance approach to the arm's length debt test

    Registered
    October 2018

    Purpose
    The final Guideline will set out the ATO's compliance approach to taxpayers' use of the arm's length debt test for the purposes of the thin capitalisation regime in Division 820 of the Income Tax Assessment Act 1997.

    Expected completion
    To be advised

    Comments
    Draft PCG 2019/D3 published on 28 August 2019. Comments close on 9 October 2019.

    Contact
    Nick Trotman, Public Groups and International
    Phone: (03) 9285 1568
    Nick.Trotman@ato.gov.au

    [3926] Transfer pricing – cross-border leasing

    Title
    Final Practical Compliance Guideline
    ATO compliance approach to transfer pricing issues associated with cross-border leasing of foreign residence vessels in Australia (LILO)

    Registered
    June 2018

    Purpose
    The Guideline will provide practical guidance on the application of the transfer pricing provisions to cross-border leasing of vessels into Australia, by setting out the ATO's compliance approach to transfer pricing issues relating to the use of mobile offshore drilling units (MODUs), such as drill-ships, drilling rigs (including but not limited to submersibles, semi-submersibles and jack-up rigs), pipe-laying vessels (PLVs) and heavy-lift vessels (HLVs).

    Expected completion
    To be advised

    Comments
    Draft PCG 2019/D5 published on 26 September 2019. Comments period closes on 25 October 2019

    Contact
    Reuben Pace, Public Groups and International
    Phone: (03) 8632 5985
    Reuben.Pace@ato.gov.au

    [3932] Taxing US and UK resident financial institutions under US and UK taxation conventions

    Title
    Final Addendum to Taxation Ruling TR 2005/5
    Income tax: ascertaining the right to tax United States (US) and United Kingdom (UK) resident financial institutions under the US and the UK taxation conventions in respect of interest income arising in Australia

    Registered
    July 2018

    Purpose
    The final Addendum will clarify certain aspects of the second limb of the definition of 'financial institution' which is used in Australia's double tax conventions with the US and the UK.

    Expected completion
    March 2020

    Comments
    The draft consolidation for TR 2005/5 published on 28 November 2018. Comments period closed on 11 January 2019. We are further considering comments and issues raised during consultation.

    Contact
    James Campbell, Public Groups and International
    Phone: (02) 9374 8955
    James.Campbell@ato.gov.au

    [3944] Prevention of treaty abuse

    Title
    Draft Practical Compliance Guideline
    Prevention of treaty abuse: the principal purpose test

    Registered
    October 2018

    Purpose
    The draft Guideline will explain our proposed approach to administering the principal purpose test in a tax agreement that has been modified by the enactment of the Multilateral Instrument.

    Expected completion
    October 2019

    Title
    Draft Law Administration Practice Statement
    Applying the OECD's MLI Article 7 on the prevention of treaty abuse

    Registered
    October 2018

    Purpose
    The draft Practice statement will provide proposed guidance to assist our staff in applying the principal purpose test and therefore deny a benefit under a covered tax agreement, or to rule on the application of the principal purpose test in a private ruling, class ruling or product ruling. The draft Practice statement will also outline the proposed role and operation of the General Anti-Avoidance Rules Panel in relation to the principal purpose test.

    Expected completion
    October 2019

    Contact
    TaxTreaties@ato.gov.au

    [3946] Offshore shipping service hubs

    Title
    Final Schedule 3 to Practical Compliance Guideline PCG 2017/1
    Offshore shipping service hubs

    Registered
    October 2018

    Purpose
    The final Schedule will set out practical administration approaches to assist taxpayers to comply with their transfer pricing obligations, and allows taxpayers to self-assess their transfer pricing risk for certain types of offshore shipping service hub arrangements.

    Expected completion
    November 2019

    Comments
    Draft Schedule 3 to PCG 2017/1 published on 8 November 2018. Comments period closed on 21 December 2018.

    Contact
    offshorehubs@ato.gov.au

    [3950] OECD hybrid mismatch rules

    Title
    Final Law Companion Ruling
    OECD hybrid mismatch rules – targeted integrity rule

    Registered
    October 2018

    Purpose
    The final Ruling will provide the Commissioner's view in relation to the hybrid mismatch targeted integrity rule in Subdivision 832-J of the Income Tax Assessment Act 1997.

    Expected completion
    To be advised

    Comments
    Draft LCR 2019/D1 published on 5 April 2019. Comments period closed on 10 May 2019.

    Contact
    HybridMismatches@ato.gov.au

    Title
    OECD hybrid mismatch rules – foreign law interactions

    Registered
    October 2018

    Expected completion
    To be advised

    Comments
    We are currently considering options for the format of the consultation we will conduct in relation to foreign law interactions with Division 832.

    Contact
    HybridMismatches@ato.gov.au

    [3981] Non-concessional MIT income

    Title
    Final Law Companion Ruling

    Registered
    June 2019

    Purpose
    The final Ruling will address Schedules 1 and 5 to the Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Act 2019. In particular, the final Ruling will cover the key aspects of non-concessional MIT income, with particular focus on MIT cross staple arrangement income.

    Expected completion
    To be advised

    Comments
    Draft LCR 2019/D2 published 1 July 2019. This draft Ruling has since been updated following the receipt of feedback. We are continuing to consider submissions made on other points.

    Contact
    Jason.Heng, Tax Counsel Network
    Phone: (02) 9374 8423
    Jason.Heng@ato.gov.au

    [3985] Sovereign immunity

    Title
    Draft Law Companion Ruling
    The superannuation fund for foreign residents withholding tax exemption and sovereign immunity

    Registered
    September 2019

    Purpose
    The draft Ruling will address Schedules 3 and 4 to the Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Act 2019. In particular, the draft Ruling will cover the key aspects of the restriction to the superannuation fund for foreign residents withholding tax exemption and the codification and limitation of sovereign immunity.

    Expected completion
    November 2019

    Contact
    Kim Browning, Public Groups and International
    Phone: (02) 4923 1832
    Kim.Browning@ato.gov.au

    David Stevenson, Public Groups and International
    Phone: (02) 4923 1841
    David.Stevenson@ato.gov.au

    Last modified: 09 Oct 2019QC 50317