Global Trade Alert

On 14 May 2013, the Treasurer of Australia, Mr. Wayne Swan, has delivered the 2013-14 Budget. He has stated that A$170 billion in tax receipts have been lost since the beginning of the global financial crisis. Therefore, a series of measures increasing the tax burden of multinationals and foreign investors has been introduced as follows:
 

• Tightening of "thin capitalisation" rules for non-resident multinationals 

Effective 1 July 2014, the "thin capitalisation" rules with regard to non-residential multinationals will become stricter:

1. the general safe harbour test of 3:1 debt to equity will be decreased to 1.5:1;
2. the financial entity safe harbour test of 20:1 debt to equity will be decreased to 15:1;
3. the bank capital limit will be increased from 4% to 6% of the risk weighted assets for the bank's Australian operations.

• Non-resident's disposal of interests in Australian operations 

Until the moment, non-residents that are not operating through an Australian permanent establishment pay capital gains taxes (CGT) on assets that may be direct or indirect interests in Australian real property, including mining, quarrying and prospecting rights. However, a new legislative change foresees for CGT events occurring after 14 May 2013 Australian real property to be expanded to include new non-real property assets, such as goodwill.
 

• A new non-final withholding tax for foreign residents' sales of non-land assets 

Effective 1 July 2016, a non-final 10% withholding and remittance to the tax authorities regime will be introduced for the foreign residents' gross proceeds from the sale of certain types of Australian real property with transaction value below $2.5 million. 
 
Update with regard to the withholding tax:
On 23 February 2016, the Australian parliament passed the underlying act. It included an exclusion of the tax for properties valued below 2 million AUD and came into force - as planned - on 1 July 2016.