Australia introduces legislation for new Diverted Profits Tax

The government introduced legislation into the Parliament to implement the new Diverted Profits Tax (DPT). Designed to prevent multinational companies from shifting their Australian profits to offshore-related parties in order to avoid paying Australian tax, it will commence on 1 July.

By making it easier to apply Australia’s anti‑avoidance provisions and applying a 40% rate of tax, which will need to be paid immediately, the DPT will encourage greater compliance by large multinational enterprises with their tax obligations in Australia, including with Australia’s transfer pricing rules.
The DPT will only apply to multinationals that have global income of more than $1 billion and Australian income of more than $25 million. It will not apply to managed investment trusts or similar foreign entities, sovereign wealth funds and foreign pension funds.

A Combating Multinational Tax Avoidance Bill 2017 was also introduced into Parliament. This will increase the maximum penalty for large multinationals that fail to lodge tax documents on time to A$525,000 and amend Australia’s transfer pricing law to give effect to the 2015 OECD transfer pricing recommendations.