Multinational Anti-Avoidance Law (MAAL) took effect on 1 January 2016 and prevents multinationals from escaping Australian tax by using artificial or contrived arrangements to avoid having a taxable presence in Australia.
The new draft legislation, aims to strengthen the MAAL by preventing the use of foreign trusts and partnerships in corporate structures to avoid the application of the MAAL.
Crowe Horwath managing partner, Scott Mason said the ATO was looking to “align some substance over form” with the new legislation by clearing up the grey areas of the law.
It is firming up on two types of structures that probably were already captured but the government is sending a strong message to say, 'if you use a partnerships structure offshore or you use a trusts structure offshore to try and defeat our rules, we're specifically going to ignore those structures and we're going to get you anyway',” said Mr Mason.
“This is an absolute line in the sand that says, ‘we are aware of these particular structures and we're putting you on notice that we want to tax them’.”
According to the ATO, 38 taxpayers have brought or are bringing their Australian sourced sales onshore in response to the MAAL so far, with an expected additional $7 billion in income each year returning to the tax base.
Mr Mason believes the proposed legislation will drive entities to co-operate with the ATO and see an increase in revenue.
“It really triggers conversations between the multinationals and the ATO and ultimately it is trying to drive good behaviour because if the ATO catches you, they apply those penalties and now the stake in the sand is put there, my thought process is those multinationals are more likely to open a dialogue proactively,” added Mr Mason.
“The future information the ATO will get about these entities from other sources, these entities will have to be crazy to think they can hide.”
“Nowhere to hide”
Further, Mr Mason believes the ATO’s current drive to increase its visibility of taxpayers, be it large entities or individuals, shows a sign of the times.
“The ATO, like other tax authorities, are starting to work together to share information,” said Mr Mason.
“It's not just tax information but a whole raft of other information, for example, the ATO will probably get a hold of property owning registers and mortgage holding registers in the UK, and that informs them about which Australian residents are holding property in the UK, so it's not a tax-based source of information but with data matching you can put one and one together and suddenly find out you've got a whole lot of Australians who aren’t returning foreign sourced income.
“Whether that's intentional or ignorance, the combination of strengthening rules and greater access to information and data matching is just going to change the world and there will be nowhere to hide.”
You can read the draft legislation in full here, and all interested stakeholders are encouraged to make a submission by Friday, 23 February 2018.