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Legislation Introduced in Australian House of Representatives to Amend Thin Cap Rules

On 4 July 2019, the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019 was introduced in the Australian House of Representatives. The measures of the bill as provided in the explanatory memorandum are as follows:

Thin capitalisation

Schedule 1 to this Bill amends the ITAA 1997 to tighten Australia’s thin capitalisation rules by:

  • requiring an entity to use the value of the assets, liabilities (including debt capital) and equity capital that are used in its financial statements;
  • removing the ability for an entity to revalue its assets specifically for thin capitalisation purposes; and
  • ensuring that non-ADI foreign controlled Australian tax consolidated groups and multiple entry consolidated groups that have foreign investments or operations are treated as both outward investing and inward investing entities.

The amendments relating to the valuation of assets, liabilities (including debt capital) and equity capital generally apply from 7.30 pm by legal time in the Australian Capital Territory, on 8 May 2018.

The amendments relating to non-ADI foreign controlled Australian tax consolidated groups and multiple entry consolidated groups apply to income years beginning on or after 1 July 2019.

Online hotel bookings

Schedule 2 to this Bill requires offshore suppliers of rights or options to use commercial accommodation in Australia to include these supplies in working out their GST turnover.

These amendments apply in relation to supplies where consideration is first received, or before consideration is received an invoice is issued, on or after 1 July 2019.

Removing luxury car tax on re-imported cars refurbished overseas

Schedule 3 to this Bill removes liability for luxury car tax from cars that are re-imported following service, repair or refurbishment overseas.

The amendments apply to importations made on or after 1 January 2019.

Note - two separate bills of the same name were introduced in 2018. The first included the measures above but was not approved. The second was enacted in April 2019 (previous coverage).

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