Commonwealth of Australia Explanatory Memoranda

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TREASURY LAWS AMENDMENT (COMBATING MULTINATIONAL TAX AVOIDANCE) BILL 2017

                               2016-2017



  THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA




                   HOUSE OF REPRESENTATIVES




TREASURY LAWS AMENDMENT (COMBATING MULTINATIONAL TAX
                 AVOIDANCE) BILL 2017




       SUPPLEMENTARY EXPLANATORY MEMORANDUM



         Amendments to be moved on behalf of the Government



   (Circulated by authority of the Treasurer, the Hon Scott Morrison MP)
Table of contents

Glossary ................................................................................................. 1

General outline and financial impact....................................................... 3

Amendment to Schedule 1 to the Treasury Laws Amendment
(Combating Multinational Tax Avoidance) Bill 2017 ............................... 5
Glossary
     The following abbreviations and acronyms are used throughout this
     supplementary explanatory memorandum.


              Abbreviation                          Definition
      CFC                          Controlled Foreign Companies
      DPT                          Diverted Profits Tax
      ITAA 1936                    Income Tax Assessment Act 1936




                                                                         1
General outline and financial impact

Amendment to Schedule 1 to the Treasury Laws Amendment
(Combating Multinational Tax Avoidance) Bill 2017
        The amendment to Schedule 1 to the Treasury Laws Amendment
        (Combating Multinational Tax Avoidance) Bill 2017 clarifies the
        interaction between the controlled foreign companies (CFC) rules in
        Part X of the Income Tax Assessment Act 1936 (ITAA 1936) and the
        Diverted Profits Tax (DPT).

        Date of effect: The amendment applies in relation to tax benefits for an
        income year that starts on or after 1 July 2017 (whether or not the tax
        benefits arises in connection with a scheme that was entered into, or was
        commenced to be carried out, before 1 July 2017).

        Proposal announced: Not previously announced.

        Financial impact: Nil.

        Compliance cost impact: The amendment has no additional compliance
        cost impact.




                                                                                    3
Amendment to Schedule 1 to the Treasury
Laws Amendment (Combating
Multinational Tax Avoidance) Bill 2017

Outline of chapter
         1.1        The amendment to Schedule 1 to the Treasury Laws
         Amendment (Combating Multinational Tax Avoidance) Bill 2017 (the
         Bill) clarifies the interaction between the CFC rules in Part X of the
         ITAA 1936 and the DPT.



Detailed explanation of new law

Amendment to Schedule 1 to the Treasury Laws Amendment (Combating
Multinational Tax Avoidance) Bill 2017

         1.2       Amendment 1 clarifies that where an amount of attributable
         income is included in the assessable income of the relevant taxpayer (or
         an associate of the relevant taxpayer) due to the operation of the CFC
         rules, then that amount reduces the relevant taxpayer's DPT tax benefit.

         1.3        The DPT tax benefit is only reduced to the extent that the
         amount is included in assessable income as a result of the scheme and is
         directly referable to the DPT tax benefit. [Amendment 1, subsections 177J(6)
         and (6A) of the ITAA 1936]

         1.4       The amendment ensures that, for example, the reduction to the
         relevant taxpayer's DPT tax benefit is calculated correctly in situations
         where a partner in an Australian partnership, a beneficiary of an
         Australian trust or the trustee of an Australian trust is treated as having
         suffered a tax detriment for the purpose of section 460 of the ITAA 1936.
         In each of these cases, the decrease in the taxpayer's DPT tax benefit does
         not include the amount of that tax detriment.




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