Australia: Diverted Profits Tax Coming Soon

What the BEPS? Tax litigation growth, if nothing else… Significant increase of double tax cases, likely…

Some readers will remember that Australia and the UK had formed a “joint working group” last year to explore, among other things, the relevance of the diverted profits tax.

The government of Australia recently released a consultation paper titled “Implementing a Diverted Profits Tax“.

The main “features” of the new tax are presented as follow:

“Australia’s DPT will broadly adopt the main features of the second limb of the UK’s DPT. It will:

• impose a penalty tax rate of 40 per cent on profits transferred offshore through related party transactions with insufficient economic substance that reduce the tax paid on the profits generated in Australia by more than 20 per cent;

• apply where it is reasonable to conclude based on the information available at the time to the ATO that the arrangement is designed to secure a tax reduction;

• provide the ATO with more options to reconstruct the alternative arrangement on which to assess the diverted profits where a related party transaction is assessed to be artificial or contrived;

• impose a liability when an assessment is issued by the ATO (that is, it will not operate on a self-assessment basis);

• require upfront payment of any DPT liability, which can only be adjusted following a successful review of the assessment; and

• put the onus on taxpayers to provide relevant and timely information on offshore related party transactions to the ATO to prove why the DPT should not apply.”

The DPT would apply to fiscal years commencing on or after July 1st, 2017.

It would apply to “globally significant entities” (consolidated sales over 1 billion, labelled as “income” in the paper).

The paper highlights specific cases where the DPT would apply.

The complete consultation paper is available here.

Comments can be submitted until 17 June 2016 in the following formats:


Mail: Division Head Corporate and International Tax Division The Treasury Langton Crescent PARKES ACT 2600


Robert Robillard, Ph.D., CPA, CGA, Adm.A., MBA, M.Sc. Econ., M.A.P.
Senior Partner, DRTP Consulting Inc.
514-742-8086; robertrobillard “at”

The convergence of DRTP Consulting’s tax, accounting and economics expertise makes a difference. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. DRTP Consulting Inc. or the author are not responsible or liable for any error, omission or inaccuracy in such information. The opinions expressed in this blogpost are those of the author. Readers should seek advice and counsel from DRTP Consulting Inc. as required.

Posted by drtp On 11 May 2016