22 March 2018

Closing tax consolidation loopholes

Note

Today the Turnbull Government’s commitment to ensure multinationals pay the right amount of tax in Australia continued with the passage through Parliament of the Treasury Laws Amendment (Income Tax Consolidation Integrity) Bill 2018.

This Bill implements recommendations made by the Board of Taxation to improve the integrity and operation of Australia’s tax system, by closing loopholes in the tax consolidation regime which create unintended and inappropriate tax outcomes.

Tax consolidation allows wholly-owned corporate groups to be treated as a single entity for tax purposes. There are around 12,000 tax consolidated groups in Australia, including the majority of our largest businesses. Today’s changes improve the integrity of the tax system and reduce compliance costs for Australian businesses.

Importantly, this Bill puts to an end the practice of ‘churning’ entities between related parties, ensuring that multinational consolidated groups pay the right amount of tax on gains from their Australian assets.

This Bill also improves the integrity and operation of the consolidation regime by:

  • changing the tax treatment of liabilities which give rise to a future tax deduction, ensuring a double tax benefit does not arise,
  • removing deferred tax liabilities from consolidation calculations,
  • ensuring anomalous outcomes do not arise from securitisation transactions commonly undertaken by financial institutions,
  • better aligning the tax treatment of certain assets and liabilities with the economic substance of transactions, and
  • preventing double tax deductions from arising when value is shifted across entities.

The Turnbull Government is committed to further strengthening the integrity of Australia’s tax system to secure more revenue for our community, helping to guarantee the infrastructure and essential services Australians rely on.