New laws to restrict a right to terminate a contract for insolvency events
As part of broader reforms to Australia's corporate insolvency laws, new laws that have come into effect from 1 July 2018 will restrict the ability of a party to enforce a right to terminate a contract in the case where the counterparty suffers an insolvency event (commonly known as 'ipso facto' clauses). The new laws will only apply to contracts, agreements or arrangements entered into from the commencement time of the Act.
The purpose of the reforms is to protect companies in financial difficulties that are undergoing genuine restructuring in accordance with the requirements of the Act.
The refinement to the application of ipso facto clauses in contracts in such circumstances is hoped to enable a business to continue to trade on in order to recover from financial distress.
Read more about the changes in our previous update here.
GST on low value imported goods
From 1 July 2018, low value imported goods are subject to Australian goods and services tax (GST). Low value imported goods are physical goods that have a customs value of A$1,000 or less (excluding alcohol and tobacco) that have been supplied to Australian consumers from offshore. Multiple low value imported goods shipped in one consignment totalling more than A$1,000 are not captured.
The new law requires overseas vendors, electronic distribution platforms and re-deliverers who meet the GST turnover threshold of $75,000 to register for and charge GST on such goods, and lodge returns to the Australian Tax Office.
By imposing GST on low value imported goods, foreign businesses now face the same tax regime as goods sourced domestically. The Government's stated intention in introducing these changes is to level the playing field for Australian retailers by reducing the tax advantage previously conferred on offshore rivals, with a view to ultimately supporting the growth of local businesses and the creation of job opportunities.
Definition of large multinational
The Government has introduced changes to broaden the definition of large multinational or significant global entity (SGE), as part of a continuing focus and drive to tighten up Australia's multinational tax integrity rules. Entities which qualify as an SGE are subject to increased scrutiny and reporting obligations under multinational tax integrity rules.
Previously, the definition of SGE only applied to an entity which is a member of a group headed by a public company or private company required to provide consolidated financial statements (with an annual income over A$1 billion). However, this definition will now be widened to capture entities whose multinational groups are headed by private companies, trusts, partnerships or investment entities.
The change means many large multinationals previously excluded from the SGE category due to their corporate group structures, may now be caught as SGEs and subject to compliance with Australia's multinational tax regime, including the Multinational Anti-Avoidance Law, Diverted Profits Tax and Country by Country reporting obligations.
The change will apply to income years commencing on or after 1 July 2018.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.