Now that the election is over, and the Labor party is officially in government people will be interested to see what policies and changes are now likely to occur. A helpful starting point is Labor’s election promises which provide a useful indication of possible areas that will be targeted over the next few years. Two of the most publicised are multinational tax avoidance and childcare subsidy changes.
One of the big tax policies that Labor took to the election was their commitment to ensure that multinationals pay their fair share of tax in Australia. To do this, Labor proposes a multipronged approach which includes: Limiting debt-related deductions (ie interest payments) by multinationals at 30% of profits to put an end to the creation of artificial debts and repayment arrangements within related entities.
Further deductions over 30% may be considered if firms can substantiate those under either the arm’s length or the worldwide gearing ratio test. Limiting the ability of large multinationals to abuse Australia’s tax treaties while holding intellectual property in tax havens from 1 July 2023. Essentially, this means that if a firm makes payments for the use of intellectual property to a jurisdiction where they do not pay “sufficient tax”, a tax deduction in Australia will be denied for those payments.
Increasing transparency by requiring large multinational firms to publicly release high-level data on how much tax they pay in the jurisdictions they operate in, along with the number of employees working there. Implementation of a public registry of beneficial ownership to show who ultimately owns, controls, or receives profits from a company or legal vehicle. This will stop individuals hiding behind complex corporate structures that avoid accountability and obscure their tax liabilities.
Mandatory reporting to shareholders as a “material tax risk” where the company is doing business in a jurisdiction with a tax rate below the global minimum (15%). Requiring government tenderers to contracts worth more than $200,000 to disclose their country of tax domicile.
During the election campaign, Labor also promised to reduce the cost of childcare by lifting the maximum child care subsidy rate to 90% for those with a first child in care. In addition, Labor will be seeking to retain the higher child care subsidy rates for second and additional children in care.
For those with school-aged children, the promise of the increased child care subsidy will be extended to outside school hours care. Over the longer term, it is also likely that Labor will be engaging with the Australian Competition and Consumer Commission (ACCC) to design a price regulation mechanism for child care and with the Productivity Commission to conduct a comprehensive review of the sector with the aim of implementing a universal 90% subsidy for all families.
Speak to one of our accountants today if you have any questions or need assistance with the agenda for the government.