Australian Proposal Diverted Profits Tax Bill 2017

The Australian Government introduced a proposal into the Australian Parliament for legislation to implement a new Diverted Profits Tax (DPT). This measure will apply in relation to tax benefits for an income year that starts on or after July 1, 2017.

DPT Government Objective

The DPT aims to ensure that the tax paid by significant global entities properly reflects the economic substance of their activities in Australia.  It targets contrived arrangements resulting in tax evasion and allows collection of information for the timely resolution of tax disputes.

How Does DPT Work

The DPT will impose a penalty rate of tax and require that tax to be paid irrespective of whether the assessment is the subject of an unresolved dispute. This will place the onus on taxpayers to provide relevant information on related party transactions to the Australian Taxation Office (ATO), making it easier for the ATO to apply current transfer pricing and anti-avoidance rules, the ATO informed. The DPT only applies to multinationals with yearly global income of more than $1 billion and Australian income of more than $25 million. Under the DPT a 40% will be due over the diverted profits.

Guidance from ATO

The ATO expects that multinationals will engage early on with the ATO and would continue to be monitored by the ATO in the event of a restructure undertaken to be compliant under the DPT. The ATO has planned issuing a guidance material for which the ATO would publish and consult on draft law companion guidelines when the legislation is introduced into Parliament. The ATO would further consult on the administrative processes that would be implemented once the legislation is enacted, and on the development of other administrative guidance.

Sources: DPT - Explanatory Memorandum, The DPT Amendment - Homepage

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