On January 2, 2018 the Australian Taxation Office (ATO) announced that it has opened a public consultation on a draft Law Companion Guideline (LCG) on the Australian diverted profits tax. The draft LCG explains how the new law will apply and explains concepts introduced by the measure. The consultation period is open until February 16, 2018. Feedback has to be submitted by email to This email address is being protected from spambots. You need JavaScript enabled to view it..
After providing a high-level outline of the new law the LCG discusses a.o. the following topics:
· Principal purpose test
o Consistency with the test in the multinational anti-avoidance legislation (MAAL)
o Consideration of the eleven matters
o Quantifiable non-tax financial benefits
o The amount of the tax benefit mentioned in paragraph 177J(1)(b)
· Sufficient foreign tax test
o Foreign tax liability: determination of amount
o Foreign tax liability: recognised entities - groups of entities
o Meaning of foreign income tax
o Reduced Australian tax liability: interaction with the thin capitalisation rules
o Foreign tax liability: recognition of losses and foreign credits
o Sufficient economic substance test
o Concept of economic substance
o Relevance of the OECD Guidelines
o Profit must reasonably reflect the economic substance of the entity's activities
· Further ATO guidance
· Administrative matters
Click here to be forwarded to the draft Law Companion Guideline (LCG) on the Australian diverted profits tax as available on the website of the Australian Taxation Office.
The ATO announced that next to the draft Law Companion Guideline on the Australian diverted profits tax it also developed a Law Administration Practice Statement “Diverted profits tax assessments” to provide direction to ATO’s on the administrative process of making a DPT assessment.
This Law Administration Practice Statement discusses a.o. the following topics:
· What should you do if you consider that the DPT may apply?
o Approval by DPT specialist team
o Consideration of DPT
o DPT Review Committee
o Initial GAAR Panel hearing
o Deputy Commissioner endorsement
o Streamlined process in exceptional cases
· What do you do after a DPT assessment is made?
o Recovering the tax payable to the ATO
o Issuing a DPT statement
o Period of review of DPT assessments
o GAAR Panel
o Amending a DPT assessment
o Extending the period of review
o Shortened period of review
o Objection and appeal rights
· What is the interaction between a DPT assessment and an income tax assessment for the same period?
Click here to be forwarded to the Law Administration Practice Statement “Diverted profits tax assessments” as available on ATO’s website.
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