Diverted profits tax

In the 2016-17 Budget, the Government announced that it would implement a Diverted Profits Tax (DPT) to impose a 40 per cent penalty tax on profits that have been artificially diverted from Australia by multinationals.

This exposure draft Bill and associated explanatory material would strengthen the anti-avoidance rules in Part IVA of the Income Tax Assessment Act 1936 and amend the Tax Administration Act 1953 and associated Acts to give effect to the decision.

The measure is intended to target entities with annual global income of $1 billion or more that shift profits to offshore associates where:

• the resulting increase in the foreign tax liability is less than 80 per cent of the corresponding decrease in the Australian tax liability;
• there is insufficient economic substance; and
• one of the principal purposes is to obtain a tax benefit.

The Government invites all interested parties to make a submission.