The Federal Treasurer handed down the 2014-2015 Federal Budget
last night. The budget contained few corporate tax measures.
Here's a snapshot of the corporate tax measures set to have an
effect on Australian businesses in the coming years.
There will be a tightening of the CGT treatment of indirect
Australian real property interests. Specifically, the proposed
changes will treat mining, quarrying and prospecting information
and goodwill, together with mining rights, as real property for the
purposes of the "principal asset test."
The Government will not proceed with the previous
Government's proposal to repeal section 25-90 of the Income Tax
Assessment Act 1997, which deals with deductions relating to
foreign source income. The Government will instead consult on a
targeted integrity rule.
The Government will also not proceed with the previous
Government's announcement in the 2013-2014 Budget to remove
inconsistencies in the income tax treatment of multiple entry
consolidated groups. This decision was the result of a review that
concluded that it was not feasible to review inconsistencies
without "a reconsideration of broader international tax policy
The tax consolidation integrity package announced in the
2013-2014 Budget will be modified. Specifically:
Clarification that accounting liabilities relating to
securitised assets held by a subsidiary will be disregarded in
certain situations where the subsidiary leaves a consolidated group
and/or joins a consolidated group. This change will apply to
arrangements that commence on or after 13 May 2014. Transitional
rules will apply to arrangements that commence before this
The double deductions measure, the churning measure and the
deductible liabilities measure will be amended so that they apply
to arrangements that commence on or after 14 May 2014.
The deductible liabilities measure will also be amended so that
retirement villages' residential loan liabilities are
The start date for the new system for managed investment trusts
(MITs) will be deferred to 1 July 2015.
Revenue measures announced
The rates for the refundable and non-refundable offsets for the
R&D Tax Incentive will be reduced by 1.5%.
The superannuation guarantee rate is to go to 9.5% on 1 July
The Government has committed to cutting the company tax rate by
1.5% to 28.5% from 1 July 2015.
The Paid Parental Leave scheme will proceed from 1 July
FBT rate will be increased from 47% to 49% from 1 April 2015
until 31 March 2017. This is to prevent high income earners from
using fringe benefits to avoid the 2% budget deficit levy.
Fuel excise indexation is to recommence.
Tax and Superannuation Laws Amendment Bill 2014
The Treasurer has released exposure draft legislation dealing
with changes to the thin capitalisation rules and the exemption for
foreign dividends received by Australian companies.
The changes to the thin capitalisation rules which apply from 1
July 2014 include:
Increase the de minimis threshold from $250,000 to $2
Reduce the safe harbour debt limit from 3:1 to 1.5:1 on a debt
to equity basis.
Reduce the safe harbour debt limit for non-bank financial
entities from 20:1 to 15:1 on a debt to equity basis.
Increase the safe harbour minimum capital for banks from 4% to
6% of the risk weighted assets of their Australian operations.
Reduce the worldwide gearing ratio from 120% to 100% and make
it available to qualifying inbound investors.
In respect of the foreign dividends exemption the exemption
not be available for dividends paid on legal form shares that
are classified as debt by virtue of the debt/equity rules, and
be available non-share equity and dividends received indirectly
via trusts and partnerships.
These changes are wide-reaching and may have significant effects
on your or your clients' business. Rockwell Olivier's
corporate tax team is well placed to assist in reviewing your
company tax position and providing advice on how to achieve the
best result from the 2014-2015 Federal Budget.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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