Global

Details

  • Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 9/30/2013

Australia - Foreign hybrid entities treated as partnerships 

September 30:  Australian investment in foreign hybrid entities—such as limited partnerships and U.S. limited liability companies—has grown significantly over the past 10 years.

Australian investors in such foreign hybrid entities need to keep in mind the foreign hybrid provisions of Division 830 of the Income Tax Assessment Act 1997. Division 830 provides that certain foreign hybrid entities that are partnerships for foreign tax purposes and companies for Australian tax (including corporate limited partnerships) are to be treated as partnerships for Australian tax purposes.


Partnership treatment can be automatic (if the foreign hybrid is a controlled foreign company (CFC) and the Australian partner / shareholder is an attributable taxpayer) or by way of an irrevocable election. If an election is made, partnership treatment only applies to the electing partner’s interest in the partnership.


The election requires a “weighing up” of the expected benefits of flow-through partnership treatment against an additional compliance burden. For example, partnership treatment may provide increased access to the capital gains tax discount for eligible entities, a broader range of foreign income tax offsets, and the branch profits exemption.


However, a minority partner may experience difficulty accessing all the information required to calculate partnership net income (which can include CFC calculations) and to prepare an Australian tax return. This may make the election not viable. In some circumstances, the tax savings from making the election can be significant.


The election must be made on or before the day on which the partner files the tax return for the income year (or within the time allowed by the Commissioner).


Read a September 2013 report prepared by the KPMG member firm in Australia: Hybrid or not?




©2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.


The KPMG logo and name are trademarks of KPMG International.


KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.


The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


Direct comments, including requests for subscriptions, to us-kpmgwnt@kpmg.com.
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

 

Share this

Share this

Subscribe

Subscribe to receive the latest TaxNewsFlash email alerts (you must select the option for TaxNewsFlash)


Already a Subscriber? Login


Not a member? Subscribe now

Contact us