Australia Increases the Tax Burden of Multinationals, Foreign Investors and the Mining Industry

Baker & McKenzie's analysis of tax issues in Australia's 2013-14 Federal Budget

Baker & McKenzie Earlier this week the Australian Treasurer announced the 2013-2014 Federal Budget. The Budget includes a series of measures that increases the burdens for business, especially multinational businesses. These include:

  • tightening of thin capitalization rules where the general safe harbour test will be cut from 75% to 60% on a debt to total asset basis, reducing the financial entity safe harbour test from 20:1 debt to equity down to 15:1, and increasing the bank capital limit from 4% to 6%;
  • tightening of foreign residents capital gains tax exemption where it now includes an indirect interest in an intangible asset connected to mining, quarrying or prospecting rights (e.g. mining information);
  • a new 10% withholding tax for foreign residents’ disposal of non-land assets;
  • removal of advantages of Multiple-Entry Consolidated (MEC) groups where such groups cannot access tax benefits that are not available to domestic consolidated groups;
  • limitation of the participation exemption where a greater level of true equity ownership is required to qualify for this concession; and
  • tightening of Offshore Banking Unit regime where tax concessions will be confined to genuine mobile financial sector activities.
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