AUSTRALIA Law and Practice Contributed by: Scott Colvin, Warren Scott and Lachlan Speirs, Archer Scott Lawyers
5.3 Available Tax Credits/Incentives The principal broad-based incentive is the Research and Development Tax Incentive, which provides a refundable or non-refundable offset depending on the company’s turnover. A range of more targeted con - cessions is also available, including: • the small business capital gains tax concessions; • the instant asset write-off (subject to settings reviewed each year); • concessions for early-stage innovation companies and for venture capital investment through early- stage and other venture capital limited partner - ships; and • incentives for build-to-rent housing. The government has also introduced production incentives in priority areas, such as clean energy and critical minerals. Eligibility criteria apply to each meas - ure, and the states and territories offer their own pay - roll tax and investment incentives to attract particular industries or projects. 5.4 Tax Consolidation Tax consolidation is available for wholly owned Aus - tralian groups. A consolidated group, made up of a head company and its wholly owned Australian resi - dent subsidiaries, is treated as a single taxpayer, so that intra-group transactions are generally disregard - ed and the group lodges a single income tax return. Tax cost-setting rules apply when entities join or leave the group, and a multiple entry consolidated group can be formed by certain foreign-owned groups. The election to consolidate is irrevocable, and the head company is primarily liable for the group’s income tax. 5.5 Thin Capitalisation Rules and Other Limitations Thin capitalisation rules apply. The earnings-based rules that took effect from 1 July 2023 limit debt deductions for multinational entities, with a default fixed-ratio test that caps net debt deductions at 30% of tax earnings before interest, taxes, depreciation and amortisation, and alternative group-ratio and third-party debt tests.
A separate debt-deduction-creation rule disallows deductions arising from certain related-party arrange - ments that lack genuine commercial substance. The rules apply to both inbound and outbound investors above a de minimis level of debt deductions. 5.6 Transfer Pricing Transfer pricing rules apply. Division 815 of the Income Tax Assessment Act 1997 (Cth) requires cross-border dealings between associated enterprises to be priced on an arm’s length basis, consistent with the OECD transfer pricing guidelines. Taxpayers must keep contemporaneous documen - tation to access penalty protection, and large mul - tinational groups are subject to country-by-country reporting. The Australian Taxation Office actively reviews transfer pricing, and advance pricing arrange - ments are available to provide certainty for significant cross-border dealings. 5.7 Anti-Evasion Rules Australia has a general anti-avoidance rule in Part IVA of the Income Tax Assessment Act 1936 (Cth), under which the Commissioner of Taxation may cancel a tax benefit obtained from a scheme entered into for the dominant purpose of obtaining that benefit. Part IVA includes the multinational anti-avoidance law and the diverted profits tax, which imposes tax at 40% on profits diverted offshore, and the goods and services tax has its own anti-avoidance rule. There is a promoter penalty regime for those who pro - mote tax exploitation schemes, together with specific integrity rules addressing matters such as hybrid mis - matches and debt deductions. Enforcement is sup - ported by a well-resourced tax avoidance taskforce within the Australian Taxation Office. 5.8 Tariffs Customs duties are imposed under the Customs Tar - iff Act 1995 (Cth) and are generally low, with many goods entering duty-free and a standard rate of 5% applying to some categories. Australia maintains an extensive network of free trade agreements, includ - ing with China, the United States, Japan, the United Kingdom and the parties to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership
62 CHAMBERS.COM
Powered by FlippingBook