Component 1: Deny royalty tax deductions

Deny Significant Global Entities (SGEs) a tax deduction for royalties for the use of, or right to use, intellectual property within Australia, when either:

• the royalties are paid to a related party
• the party to which they are paid is in a jurisdiction that provides preferential tax treatment for intellectual property royalties.

Component 2: Change thin capitalisation rules

• Remove the ‘safe harbour’ and ‘arm’s length’ debt tests, leaving only the ‘worldwide gearing’ debt test.

Component 3: Improve public access to company reporting

• Require currently ‘grandfathered’ large proprietary companies with assets greater than $25 million and total income greater than $50 million to lodge financial reports.
• Abolish fees for the provision of company information and provide all company information through the Australian Securities and Investments Commission’s (ASIC) online public registers.

Component 4: Deny bad debt write-offs

• Deny creditors a tax deduction for a bad debt written off, where the debtor is a related party.

Component 5: Implement a withholding tax on fixed trust cash distributions to non-residents

• Apply a minimum final withholding tax of 30% on fixed trust cash distributions to non-residents. Non-residents would not be able to claim a refund of this withholding in Australia. Distributions to non-residents paid out of managed investment trusts or collective investment vehicles would not be subject to the withholding tax.

Component 6: Increase in promoter penalties

• Double the promoter penalty associated with the promotion of tax avoidance schemes.
• Under this proposal the penalty units associated with violating the promoter laws would be:
  • 10,000 penalty units for individuals
  • 50,000 penalty units for companies.

The proposal would take effect from 1 July 2022.