Regulation Impact Statement Updates

Official website for publishing regulatory impact analysis information for regulatory decisions announced by the Australian Government, COAG and COAG Councils.

Tax treatment of stapled structures

Aust Gov
28th November 2018

Regulation Impact Statement Department of the Treasury

On 20 September 2018, the Government introduced legislation to protect the integrity of Australia’s corporate tax system by addressing risks posed by stapled structures and similar arrangements. The package implements the measures announced in the then Treasurer’s press release of 27 March 2018 (with respect to the staples integrity measures) and addresses the Government’s previous announcements on managed investment trusts (MITs) and residential housing.

The package will ensure trading income is taxed at the corporate tax rate in the hands of foreign investors, even when that income has been channelled through a managed investment trust, and limit access to existing concessions for passive income utilised by foreign governments and foreign pension funds. In addition, the Bill seeks to limit access to the concessional MIT withholding tax rate in the emerging sectors of agriculture and residential property (other than affordable housing).

The use of staples and similar structures has grown significantly in recent years and expanded into new sectors (such as infrastructure, agriculture and residential property), beyond their traditional use in commercial and retail property. This poses a risk to government revenue and may distort investment decisions in favour of land rich investments.

To balance concerns over the impact on existing arrangements, transitional arrangements of seven years (for ordinary business staples) and 15 years (for infrastructure staples) have been included for the majority of the package.

The Treasury prepared a Regulation Impact Statement (RIS), which was assessed by the Office of Best Practice Regulation (OBPR) as compliant and best practice under the Government’s RIS requirements.

The RIS estimates that the changes will increase average annual regulatory costs for businesses by $4.8 million. The OBPR agreed to this estimate.

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