Key takeaways from the 2024 Australian Federal Budget for Business:
$717.8m
to boost ATO Tax Avoidance task force
Delay of expansion of foreign resident CGT rules
In last year’s Federal Budget, the Government announced measures to strengthen the foreign resident CGT regime. Treasury undertook a consultation process in respect of these measures in July / August 2024.
The measures were intended to apply to CGT events commencing on or after 1 July 2025 but will now be delayed to the later of 1 October 2025, or the first day of January, April, July or October after which the amending Act receives royal assent.
Broadly, these measures seek to expand the types of assets that foreign residents will be subject to Australian CGT on. This will be done by expanding the concept of Taxable Australian Property from real property, leases of land, mining rights or interests in Australian companies that derive their value principally from these assets.
Foreign residents will become subject to Australian CGT on assets which derive their economic value from the use of Australian land and/or natural resources. This would include infrastructure installed on land, energy, telecommunications and transport infrastructure.
The time at which you need to test whether a company principally derives its value from Australian land will also change from a point-in-time test (generally, the time of sale) to include a 365-day period prior to the disposal.
There will also be ATO notification requirements for high-value transactions, which may be required to be made in advance of the sale.
Expansion and extension of ATO tax avoidance taskforce
The Tax Avoidance Taskforce was established in 2016 to improve compliance among large corporates and multinationals. This includes a focus on the Top 100 and Top 1,000 public and multinational businesses. Over time, its scope has expanded to cover complex trust structures, limiting deductions related to debt and intangibles payable offshore, private equity arrangements and intermediaries promoting aggressive tax strategies.
Among the initiatives supported by the Taskforce is the Top 1000 Combined Assurance Program, which assesses the income tax and GST performance of large business groups (entities with a turnover of over $350m) to strengthen transparency and promote voluntary compliance.
The Government has allocated a further $717.8m to the ATO Tax Avoidance Taskforce for a two-year expansion and one-year extension into FY28-29.
Since inception of the ATO Tax Avoidance Taskforce up to 30 June 2024, these activities have resulted in raising $22.8bn in tax liabilities from public companies and multinational groups.
Clarification and clamp down on misuse of Managed Investment Trust withholding tax concessions
The Managed Investment Trust (MIT) regime provides concessional withholding tax rates on certain distributions made to foreign resident investors. The regime is intended to attract foreign investment in Australian MITs, generally in Australian property.
The Government have announced their intention to amend the rules applicable to MITs to:
- Reaffirm that genuine foreign based widely held investors, such as pension funds, can continue to access the concessional withholding tax rates on eligible distributions;
- Clarify that trusts ultimately owned by a single widely held investor (such as a foreign pension fund) are able to access the MIT concessions; and
- Strengthen the rules to prevent misuse, such as where taxpayers undertake non-commercial restructures to inappropriately access MIT withholding benefits. These measures will complement the ATO’s ability to challenge misuse under existing General Anti-Avoidance Rules.
These measures are intended to apply to payments made from 13 March 2025.
