The Government will introduce a Diverted Profits Tax (DPT) aimed at multinationals that artificially divert profits from Australia. The DPT will target businesses that shift profits offshore through arrangements that result in less than 80 per cent tax being paid overseas than would otherwise have been paid in Australia and where it is reasonable to conclude that the arrangement is designed to secure a tax reduction and lacks economic substance. Where such arrangements are entered into, the Government will apply a 40 per cent tax on the diverted profits to ensure that large multinationals are paying sufficient tax in Australia.
The DPT will apply to multinationals with global revenue of $1 billion or more. The DPT will not apply to multinationals with Australian turnover of less than $25 million unless they are artificially booking their revenue offshore.
The DPT will provide the Australian Tax Office (ATO) with greater powers to deal with multinationals who transfer profits, assets or risks to offshore related parties using artificial or contrived arrangements to avoid Australian tax and who do not cooperate with the ATO. By imposing a penalty rate of tax, requiring the DPT to be paid on assessment and broadening the ATO reconstruction powers, the DPT will encourage greater openness with the ATO, address information asymmetries and allow for speedier resolution of disputes including under our transfer pricing rules.
The DPT will apply from 1 July 2017 and forms part of the Government's Tax Integrity Package, which helps to ensure that multinationals are paying the right amount of tax.
The attached consultation paper details the key design features of the DPT. The Government invites all interested parties to make a submission on the design of the DPT.