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Federal Budget 2018 Insights: Financial Services

Budget 2018: Financial Services

The Budget although containing little excitement for financial services, had a number of low key integrity measures while at the same time deferring a number of previously announced measures.


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Federal Budget Insights: Financial Services

Research and Development

The Budget contained a number of changes to R&D Tax Incentive. In most cases large companies with an aggregated turnover above $20 million will be adversely impacted.

  • 8.5 percent tax saving on R&D expenditure will be replaced with a scale from 4 – 12.5 percent
  • The R&D cap will increase from $100 million to $150 million
  • ATO will publish details of R&D claimants creating greater transparency
  • ATO and AusIndustry will have increase resources to tackle overstated expenditure claims.

MIT and AMIT changes

The budget included further important change to how capital gains flows through Managed Investment Trusts (MITs) and Attribution Managed Investment Trusts (AMITs). From 1 July 2019, MITs and AMITs will no longer apply the capital gains tax discount at trust level. This will align the treatment of MITs and AMITs with the December 2017 Corporate Collective Investment Vehicle (CCIV) draft.

Updated list of EOI countries

The list of Exchange of Information (EOI) countries will be updated to include 56 jurisdictions with who Australia has entered into EOI agreement since 2012.

Thin Capitalisation

Two minor but important changes to the thin capitalisation rules are included in the Budget and apply from income years commencing on or after 1 July 2019. The first change is the treat consolidated and multiple entities (MEC) groups that are bot foreign controlled and control a foreign entity as bot inward and outward investors for thin capitalisation purposes. The second change is to prevent taxpayers revaluing assets for thin capitalisation purposes only by requiring all entities to use the accounting value of their assets for their thin capitalisation calculations.

Significant global entities

Significant global entity (SGE) definition will be broadened to include entities that are member of a group headed by trusts, partnership and investment entities. Being an SGE brings the Multinational Anti-avoidance Law and Divert Profits Tax rules into place as well as increased administrative penalties.

TOFA reform

The changes to the Taxation of Financial Arrangement (TOFA) rules previously announced in December 2017 have been deferred.

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