Treasury targets foreign investors
Treasury has released draft legislation on the tax treatment of stapled structures in an effort to ensure foreign investors don't have a competitive advantage over Australian investors.
The draft legislation was in response to an increasing number of foreign investors seeking to convert trading income into more favourably taxed passive income through the use of stapled structures.
When combined with existing concessions used by foreign pension funds and sovereign wealth funds, some foreign investors were paying tax rates of 15 per cent, or in some cases, far less, Treasury said.
The proposed amendments in the announced package will ensure that trading income that is converted to passive income will be taxed at the corporate tax rate.
They would also ensure foreign investors would no longer be able to use trusts and partnerships to “double gear” their investments to generate more favourably taxed interest income.
The amendments would also ensure foreign pension fund withholding tax exemption for interest and dividends is limited to portfolio investments only, and that a legislative framework is created for the existing tax exemption for foreign governments.
The Turnbull government said the proposed amendments would include transitional arrangements of seven years for ordinary business staples and 15 years for economic infrastructure assets.
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