This proposal would introduce a new super-profits tax at a rate of 40 per cent that would apply to company profits that exceed an allowance for a corporate equity threshold with effect from 1 July 2022.

Only post company tax Australian sourced profits would be subject to the super-profits tax and the allowance for corporate equity threshold would equal shareholder equity multiplied by 5 per cent plus the long-term bond rate.

• Companies would be entitled to a tax offset that would refund the equivalent of the super-profits tax paid on the first $100 million of turnover.
• The allowance for corporate equity means that if a company’s return on equity is below 5 per cent plus the long term bond rate, no super-profits tax would be payable.
  • A company in this situation would accrue super-profits tax losses which could be carried forward to later years and used to offset future super-profits tax liabilities.
• Companies would be able to look back over the ten years prior to the introduction of the tax and accumulate a balance of super-profits losses that could be utilised from the start of the proposal.
• Super-profits tax would not be deductible for company tax purposes.
• The payment of the super-profits tax would generate dividend imputation franking credits.
• Mining and oil and gas companies liable for resources rent taxes would be exempt from this proposal.