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Review of International Tax Arrangements

This review examines international tax issues in the context of securing Australia's prosperity. It explores ways to attract business and investment, improve competitiveness for Australian-based companies, enhance Australia's attractiveness as a financial center, and improve tax treatment for foreign expatriates.

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Review of International Tax Arrangements

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  1. Mr Neil MotteramTreasury Review of International Tax Arrangements

  2. Context of review • Limited consideration of internationaltax issues in RBT • Commitment in Securing Australia’s Prosperity • Scope consistent with issues raised by business

  3. Why review international tax arrangements?

  4. Greater opportunity for business Global integration Increased global integration

  5. ….. and also greater choices Investment location Place of residence Head office and support services Non-tax factors usually most important, but tax can be a factor Global integration Increased global integration

  6. International trends • Corporate tax rates are falling • Trend away from dividend imputation • Countries addressing tax impediments to their businesses operating in a global environment

  7. Key issues for consultation

  8. Foreign dividend credit Options for reform Dividend Streaming Creates bias at resident shareholder level against companies expanding offshore Franking credits for foreign DWT But implications for cost of capital unclear Chap 2 - Attracting equity capital for offshore expansion Shareholders receive franking credits only for Australian company tax paid

  9. Expand country exemption list Policy outcomes Determine tax treaty priorities Improve rollover relief Country priorities Exempt some tainted services income Other technical issues Chap 3 - Improving the competitiveness of Australian-based companies Amend corporate residency test Clarify to reduce uncertainty Better target CFC provisions

  10. Simplify treatment of foreign non-portfolio dividends Exempt all non-portfolio dividends from tax Provide conduit CGT relief Improve treatment of conduit income Implement Foreign Income Account Chap 3 - Improving the competitiveness of Australian-based companies

  11. Long term replacement of FIF regime FIF rules are complex In the short term consider options to better target existing rules: Exempt complying super funds Impediments to efficient funds management industry Increase 5 percent balanced portfolio exemption threshold Exempt managed funds that track widely recognised indices Allow funds management services to be an eligible activity Unit trust tax rules penalise Australian funds Improve flow-through treatment for unit trusts Chap 4 - Enhancing Australia’s attractiveness as a global financial centre

  12. Exemption for FSI of temporary residents Address CGT concerns of departing residents - through DTAs Departing residents allowed access to super Costs of treatment or shortages borne by business Improve exemption from FIF rules Do not proceed with minor RBT measures that would increase impediments Possible new measures Prevent double taxation of cross-border element of employee share interests Chap 5 - Improving the tax treatment of foreign expatriates International competition to attract mobile skilled labour Previously announced measures Tax impediments to the employment of expatriates

  13. Mr Neil MotteramTreasury Review of International Tax Arrangements

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