26 July 2018

Removing tax loopholes

The Turnbull Government continues to deliver on its commitment to protect the integrity of Australia’s corporate tax system, by tightening the rules on stapled structures that have been used by foreigners to reduce the tax paid on the income they earn from their Australian investments.

Staples can present an unintended tax loophole available only to foreign investors. They are usually used to invest in property.

The draft legislation, released by the Turnbull Government today, shuts down this unintended tax concession. It neutralises the tax benefits of certain stapled structures and tightens concessions available to foreign investors (such as foreign sovereign wealth funds and pension funds).

The exposure draft also promotes more investment in affordable housing, especially for low to moderate income earners. The new legislation will allow foreign investors access to the concessional Managed Investment Trust (MIT) rate if they invest in affordable housing.

MITs will also be able to be used to invest in residential housing provided they do so primarily for rental purposes. However, access to conventional tax rates will only be extended to the income from such investment derived from affordable housing.

The revised exposure draft also includes draft legislation to prevent foreign investors from accessing concessional MIT tax rates on agricultural land. 

These reforms demonstrate the Turnbull Government’s continued action to protect the integrity of Australia’s corporate tax system and to ensure that foreign investors pay their fair share of tax.

The exposure draft legislation and explanatory materials are available on the Treasury website. The Government encourages all interested parties to make a submission by 10 August 2018.