Australia to Retrospectively Amend MAAL

Australian Government publishes draft Bill, which would retrospectively amend the Multinational Anti-Avoidance Law (MAAL)

By Alex Cooper

On February 12, 2018, the Australian Government published for stakeholders’ comments a draft Bill, which would retrospectively amend the Multinational Anti-Avoidance Law (MAAL) to prevent multinationals from avoiding the application of the MAAL through the use of foreign trusts and partnerships in corporate structures.

The MAAL, which took effect on January 1, 2016, prevents multinationals from escaping Australian tax by using artificial or contrived arrangements to avoid having a taxable presence in Australia. The Government announced in Budget 2017-18 that it would toughen the legislation.

The amendments are intended to address concerns that entities can avoid the application of the MAAL to a scheme by interposing a trust or partnership. Currently, supplies and income of Australian entities controlled by foreign entities are generally not relevant when determining if a foreign entity satisfies the conditions for the MAAL to apply.

By virtue of the amendment, special rules would apply to determining if a foreign entity satisfies the conditions for the MAAL to apply if supplies are made by a trust or partnership. Supplies made by a trust or partnership to Australian customers and income received from these supplies would be treated as being made or received by a foreign entity if the trust or partnership has at least one foreign entity participant and:

  • Is connected with the foreign entity; or
  • Would be an affiliate of the foreign entity if the trust or partnership was an individual or a company; or
  • Is part of a global group that also includes the foreign entity.

The amendments would take retrospective effect from January 1, 2016. The Government noted that not making the law retrospective could reward entities that have engaged in deliberate tax avoidance and incentivize further attempts to undermine the Australian tax system.

Comments on the draft Bill must be received by February 23, 2018.

See: Exposure Draft and Explanatory Materials

The author is with TP News