Last month, we reported in our
White Paper on taxation proposals directed at infrastructure
and utility privatisation transactions. Since we wrote, the
Commonwealth Treasury ("Treasury") has published a policy
paper directed at the use of stapled structures, for consultation.
The Treasury paper focuses on the
recharacterisation of trading income as "passive"
flow-through income in these structures, on which we also reported
in our White Paper.
In summary, Treasury states that the recharacterisation results
in "taxation distortions" and that the federal government
"is considering measures which remove the tax advantages of
stapled arrangements". The cost of capital may increase for
transactions which rely on stapled structures to improve investor
after-tax rates of return, but Treasury says that appropriate
policy changes will remove "distortions to investment
decisions and improve competitive neutrality". Possible
Disallowing cross-staple payment
Taxing recipients of cross-staple
payments at the Australian company tax rate (subject to double tax
Treating stapled structures as
consolidated for tax purposes.
Separately, the Australian Taxation Office ("ATO") has
announced that a further consultation timetable on its Taxpayer
Alert TA 2017/1 on stapled structures and draft Privatisation and
Infrastructure—Australian Federal Tax Framework will be
supplemented by a round of consultation on control for the purposes
of Division 6C (specifically, veto rights giving rise to control).
The ATO requests feedback by 26 May 2017 (on the control test) and
30 June 2017 (on the Framework), and it will initiate feedback
starting in early June 2017 on TA 2017/1.
You might note that the feedback date on Treasury's paper
(20 April 2017) is unusually short—notably, before the next
Commonwealth budget due to be handed down on 9 May 2017—which
may signal that the federal government is keen to act soon on
stapled structures, well before the ATO finalises its own position
on the matter.
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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