In the 2024-25 Federal Budget, the Government announced the discontinuation of previously announced rules to deny, from 1 July 2023, tax deductions for payments made by Significant Global Entity’s (SGEs) relating to intangible assets connected with low corporate tax jurisdictions.

In its place, the Government announced new measures to penalise, from 1 July 2026, SGEs that are found to have mischaracterised or undervalued royalty payments, to which royalty withholding tax would otherwise apply. 

The discontinuation is a sensible step to avoid potential duplication of rules following the introduction of the ‘Pillar Two’ Global Minimum Tax and Domestic Minimum Tax measures, which should broadly apply to combat tax avoidance using cross border intangible payments to low taxed jurisdictions.

Our 2024-25 Federal Budget commentary can be found here.

Our Client Alert of 25 March 2024 in respect of the Pillar Two exposure draft materials can be found here.

Our Client Alert of 6 April 2023 on this discontinued measure can be found here.

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