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The Labor Government has followed through on its election commitment of a multinational tax integrity package to target the tax loopholes used by multinational enterprises (MNEs) and to improve tax transparency, with the release of Treasury’s Discussion Paper on 5 August 2022.

On 1 August 2022, Treasury released draft legislation to prevent the taxation by Australia of Indian resident firms providing certain technical services performed outside Australia to Australian customers.

As we come to the end of the financial year, its timely to review your upcoming tax compliance obligations. For multinational entities, the disclosures and complexities of tax compliance generally have never been more complex or challenging. Here are some of the main IDS issues to be aware of.

In October 2021, over 135 jurisdictions (including Australia) joined a ground-breaking plan to update key elements of the international tax system. The Global Anti-Base Erosion Rules (GloBE) are intended to ensure large multinational enterprises pay a minimum level of tax on the income arising in each of the jurisdictions where they operate. The OECD released the Pillar Two Model Rules on 20 December 2021, and Commentary to accompany the Rules on 14 March 2022. Further guidance is expected by way of an Implementation Framework, but that may not be completed and available until the end of 2022.

Australia entered into the Economic Cooperation and Trade Agreement (“ECTA”) on 2 April 2022. One surprising feature of the ECTA was the side agreement for Australia to essentially overturn, by way of domestic legislation, the result of the full Federal Court decision of Satyam Computer Services Limited v Commissioner of Taxation [2018] FCAFC 172. That case held that Australia had taxing rights over certain income (under the tax treaty between Australia and India) derived by primarily Indian offshore IT companies, even though those services were performed offshore, and even where Australia’s domestic legislation did not otherwise impose tax.

Australian manufacturers have been through difficult times, particularly with the shutdown of the automotive industry, but remaining businesses are proving to be agile and resilient having already battled through lots of challenges. In addition, the accelerating pace of new technologies being introduced, combined with COVID-19 disruption and the Government’s substantial industry support, many manufacturing business models have been fundamentally challenged for the better.

With rising supply chain costs and disruptions on a global scale as a result of the pandemic, Australia has been a prime example of resilience by increasing reliance on domestic products to minimise shortages. Although we’ve increased the supply of Australian products, some organisations struggle to compete with global sellers. As supply chains slowly ease back into a pre-pandemic rhythm and import capabilities open back up to their full potential, to compete on a global scale more efficiently, this creates an opportunity to consider where trade policies via tariffs and quotas could be applied to even out the playing field.

On April 2, 2022, Australia and India signed the Australia-India Economic Cooperation and Trade Agreement, a significant step towards strengthening economic ties between the two countries. Valued at $12.6b, the agreement is expected to eliminate tariffs on more than 85% of Australian Goods Exported to India.

The compliance requirements for disclosure of transfer pricing adjustments – which need to be supported by Valuation Advice rulings or registration in the Provisional Value Scheme as above – are highly technical.

In this podcast, Tax Partners Michael Catterall and Lorena Sosa discuss aspects Australian businesses should consider when exploring new international markets, including operations and logistics, strategy planning, customs and duties, and tax complexities.

Across all industries and at all levels of employment – from CEOs to backpackers – businesses are looking to this year’s Federal Budget for incentives to make working in Australia more attractive.

On 3 November 2021, the High Court of Australia handed down a landmark decision, ruling that the “backpacker tax” imposed on a UK national who was deemed to be an Australian tax resident was in breach of the non-discrimination clauses in the Australia-UK Double Tax Agreement.