House of Representatives

Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

General outline and financial impact

The general anti-avoidance rule

Schedule 1 to this Bill amends Part IVA of the Income Tax Assessment Act 1936 to ensure its effective operation as the income tax general anti-avoidance provision.

The principal role of Part IVA is to counter arrangements that, objectively viewed, are carried out with the sole or dominant purpose of securing a tax advantage for a taxpayer.

Broadly speaking, Part IVA operates to counter such arrangements by exposing the substance or reality of the arrangements to the ordinary operation of the income tax law.

Date of effect: The amendments apply to schemes entered into, or commenced to be carried out, on or after 16 November 2012, the day on which draft legislation was released for public comment.

Proposal announced: This measure was announced in the Assistant Treasurer's Media Release No. 010 of 1 March 2012.

Financial impact: The amendments are expected to prevent the loss of over $1 billion a year.

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 1, paragraphs 1.131 to 1.137.

Compliance cost impact: Low.

Modernisation of the Transfer Pricing Rules

Schedule 2 to this Bill inserts Subdivisions 815-B, 815-C and 815-D into the Income Tax Assessment Act 1997 and Subdivision 284-E into Schedule 1 to the Taxation Administration Act 1953 . These amendments modernise Australia's domestic transfer pricing rules.

The amendments apply to both tax treaty and non-tax treaty cases, ensuring greater alignment between outcomes for international arrangements involving Australia and another jurisdiction irrespective of whether the other jurisdiction forms part of Australia's treaty network.

The amendments also contain specific rules relating to transfer pricing documentation.

Date of effect: The rules apply to income years commencing on or after the earlier of:

1 July 2013; and
the day this Bill receives Royal Assent.

In respect of withholding tax, the rules apply in relation to income derived, or taken to be derived, in income years commencing on or after the earlier of the above two dates.

Proposal announced: This measure was announced by the then Assistant Treasurer and Minister for Financial Services and Superannuation's Media Release No. 145 of 1 November 2011.

Financial impact: Nil.

Human rights implications: This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 7, paragraphs 7.22 to 7.29.

Compliance cost impact: Not expected to be significant. Much of the required information is already kept by taxpayers in complying with their tax obligations and the existing transfer pricing rules.


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