About the private capital program
The private capital program seeks to give the community confidence that Australia’s largest public or multinational groups involved in private capital investments (including private equity transactions) are paying the right amount of tax.
The program recognises the scale of private capital investment in Australia, its unique features, as well as the tax issues related to the entities and structures that are often used under these investments.
Our approach to security arrangements
Private capital investments carry certain risks to tax revenue throughout their investment lifecycle, from pre-acquisition through to the holding period and a future disposal.
Where we identify a significant risk of asset dissipation in circumstances where a tax liability is likely to arise upon disposal – such as where a foreign investor disposes of their only Australian asset – we may seek to enter into security arrangements with the private capital investor.
Security arrangements involve the Commissioner of Taxation securing funds for potential future tax liabilities, particularly in circumstances where disposal proceeds would otherwise flow offshore untaxed or undertaxed. Security arrangements will typically only be sought when the Commissioner identifies tax at risk and is not satisfied with the proposed tax treatment prior to the transaction's completion.
When we may seek security arrangements
Key factors that may lead to a request for security from the Commissioner for a private capital transaction include.
- Complete exit – when a fund is completely exiting the Australian market and no other assets will remain onshore, to protect any possible untaxed Australian revenue.
- Significant disposals – when a fund is disposing of an asset of significant value, including critical Australian infrastructure assets.
- Tax performance – when, under private capital ownership, an Australian investment has experienced declines in tax performance during the holding period.
- Bifurcation – when Australian assets or entities are bifurcated to access concessional withholding tax rates or to avoid the investment being taxable Australian property.
- Poor compliance and high-risk tax positions – when aggressive tax positions are taken, including that no Australian tax is payable, or when a foreign-owned Australian business has a poor tax compliance record.
Early and transparent engagement remains the most effective way to avoid the need for security arrangements.
We encourage taxpayers to work with us in good faith prior to disposal to resolve any differences in interpretation and ensure smooth transaction execution.
We invite international private capital participants to contact us regarding any intended exit from their Australian investments as soon as these are planned, at PGPrivateEquity@ato.gov.au.