New Government Means More Tax Scrutiny in Australia24th May 2022
It’s a new left-leaning government for Australia. What can multinational companies expect from a government led by the Labor Party? More scrutiny and tax-avoidance-prevention measures. The Labor Party is expected to continue with the previous administration’s tax cuts for individuals, but it will have to recover those dollars somewhere—and that’s where MNEs come in. The government will look to MNEs to recover AUD $1.89 billion (roughly $1.3 billion) from those tax cuts, so tax authorities will be watching your every move. Look forward to public country-by-country reporting—granted, there are still discussions taking place here, but MNEs will have to publicly report how much taxes they pay in each jurisdiction and how many employees work where. Doing business in tax havens? Expect additional reporting obligations. Australia is expected to adopt Pillar One and Pillar Two and embrace all that goes with the OECD’s BEPS 2.0 action plans. Tax authorities will be monitoring intellectual property (IP) carefully, as well, and they’ll set up a denial of deductions for royalty payments for recipients in low-tax jurisdictions. (If the taxpayer can prove the arrangement isn’t just for tax purposes, then it will get the deduction.) And if that wasn’t enough to think about, the government also plans to give the Australian Taxation Office more money for review and audit programs. And you thought the ATO was aggressive before the new government came into office.