House of Representatives

Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019

Second Reading Speech

Mr SUKKAR (Deakin - Assistant Treasurer and Minister for Housing)

I move:

That this bill be now read a second time.

Everyone needs to pay their fair share of tax to ensure the government is able to fund the vital infrastructure and services that Australians expect and deserve. Of course, most taxpayers pay their way, but integrity rules are necessary to ensure those taxpayers that don't are caught, and are made to pay their due.

Thanks to the great work of the coalition government over many years, Australia has some of the strongest rules in the world to combat tax avoidance, but more can always be done to make sure that all taxpayers, including multinationals, pay the appropriate amount of tax.

Schedule 1 to the bill introduces new provisions to improve the integrity of Australia's thin capitalisation rules.

These rules prevent multinationals from shifting profits offshore by having unrealistically high levels of debt in Australia that enables them to claim excessive interest deductions.

The bill strengthens the integrity of the thin cap rules by improving the reliability of asset valuations that are used to support debt deductions. It does this by requiring multinationals to rely on the asset values that they publish in their financial statements. This will remove the ability for multinationals to adopt a special valuation solely for tax purposes. The bill will also remove the ability for multinationals to justify their debt using assets that can't be recognised for accounting purposes.

No new revaluations are allowed after 7.30 pm on 8 May 2018. So, to allow companies to adjust to the changes, transitional rules will allow companies to rely on asset valuations that were made prior to this time until the last day before the start of their income year commencing on or after 1 July 2019.

The bill also amends the income tax law to ensure that all foreign controlled consolidated groups are recognised as inward-investing entities, even if they have foreign operations. This will confirm that these entities are not able to use thin capitalisation tests that are only appropriate for outbound investors.

Schedule 1 to the bill will ensure that multinationals cannot structure to avoid our tax integrity rules, which, as I've said, are amongst the strongest in the world.

These changes, of course, build on the already strong arsenal the tax office has to deal with multinational tax avoidance, which includes the diverted profits tax, the multinational anti-avoidance law and the Tax Avoidance Taskforce.

Schedule 2 to the bill levels the playing field for hotel bookings in Australia by ensuring that offshore sellers of Australian hotel accommodation calculate their GST turnover in the same way as local sellers from 1 July 2019.

This measure follows the government's decision to extend the GST to digital products and other services from 1 July 2017 and to low-value imported goods from 1 July 2018.

Schedule 3 ensures luxury car tax is not payable on cars that are re-imported into Australia after being refurbished overseas. This will mean that, from 1 January 2019, the same tax treatment will apply to luxury cars, irrespective of where the car is refurbished.

This bill will help ensure that taxpayers pay their fair share of tax, as I have mentioned, close loopholes and ensure programs delivered through the tax system give the greatest returns to the taxpayers, which again just demonstrates the government's commitment to continually strengthening the integrity of our tax system.

Full details of these measures are contained in the explanatory memorandum.

Debate adjourned.