2019-20 Federal Budget Report: Business Taxation - International

The Government continues its commitment to ensuring that multinationals pay the correct amount of tax on their Australian profits and that fairness is restored in the tax system.

What was announced

  • Updating the list of information exchange countries
  • Australia-Israel Tax Treaty
  • Clarifying the operation of the hybrid mismatch rules
  • Increased scrutiny by the ATO Tax Avoidance Taskforce

Updating the list of information exchange countries

The Government will update the list of countries whose residents are eligible to access a reduced withholding tax rate of 15%, instead of the default rate of 30%, on certain distributions from Australian Managed Investment Trusts (MITs).

This update will add Curaçao, Lebanon, Nauru, Pakistan, Panama, Peru, Qatar and the United Arab Emirates joining 114 other jurisdictions already on the list. The updated list will be effective from 1 January 2020.

The information exchange agreements form an important part of Australia’s commitment to safeguard against offshore tax avoidance and evasion.

Australia-Israel Tax Treaty

On 28 March 2019, the Government signed the Convention between the Government of Australia and the Government of the State of Israel for the Elimination of Double Taxation with Respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance.

The treaty relieves double taxation, lowers withholding tax rates (on interest, dividend and royalty payments) and improves certainty for taxpayers in both countries.

The Government will also introduce amendments to the International Tax Agreements Act 1953 to give the treaty force of law in Australia.

Clarifying the operation of the hybrid mismatch rules

Broadly, the hybrid mismatch rules prevent multinational corporations from exploiting differences in the tax treatment of an entity or instrument in separate jurisdictions in order to gain a tax advantage.

The Government will make several minor amendments to the hybrid mismatch rules to clarify their operation. These measures will apply to income years commencing on or after 1 January 2019, with the exception of the amendments to the integrity rule, which will apply to income years commencing on or after 2 April 2019.

Increased scrutiny by ATO Tax Avoidance Taskforce

The Government is providing increased funding of $1 billion over the next 4 years from 1 July 2019 to extend and expand the Tax Avoidance Taskforce.

Activities will include increased scrutiny of specialist tax advisors and intermediaries that promote tax avoidance schemes and strategies.