• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 9/20/2013

Australia - R&D proposals, thin capitalization, treatment of earn-outs 

September 20: The KPMG member firm in Australia prepared reports on the following developments (read the September 2013 reports by clicking on the hyperlinks provided below):
  • Research and development proposals - The Australian Coalition has proposed to review access to research and development (R&D) tax support and examine the potential for creating a second stream of the R&D tax incentive based more closely on the eligibility criteria of the former R&D tax concession. Further, the coalition would examine the potential applicability of the "patent box" models implemented overseas, including in the United Kingdom.

    Read a September 2013 report

  • Transparency of investments and ATO risk reviews - New reporting requirements suggest that superannuation funds may have far greater data on hand than has previously been the case regarding underlying investments within trusts. Availability of this data may encourage the Australian Taxation Office (ATO) to try to explore trust income / investment enquiries more intensively at the superannuation fund level, potentially increasing compliance costs.

    Read a September 2013 report

  • Thin capitalization reduction and tangible assets revaluation - The Labor Government in May 2013 (i.e., before the recent election resulting in a change in government) announced a material reduction in Australian's thin capitalization thresholds that would affect the interest that is tax deductible in Australia for companies with foreign ownership—starting after 1 July 2014. Businesses may be able to partially offset the negative impact of the decline by reassessing and revaluing their tangible assets.

    Read a September 2013 report

  • Proposed changes to the tax treatment of earn-outs - The ATO announced, as part of the 2010 Federal Budget, changes to the tax treatment of "earn-outs," which typically involve the sale of either shares or business assets, when part of the consideration is calculated by referencing to certain business earnings. The proposed changes might include that all payments are treated as related to the sale (or purchase) of the asset being disposed of.

    Read a September 2013 report

  • States step up compliance - State revenue authorities in Australia are concerned about increasing their cash-flow. Apart from tax increases, one obvious way for the states to achieve this is by increasing compliance for existing taxes.

    Read a September 2013 report

  • Tax loss availability - In recent years, tax losses are an increasing reality for many taxpayers that are adapting to changing markets and globalisation. The availability of these tax losses, particularly when they are booked as a deferred tax asset, requires careful consideration and vigilance.

    Read a September 2013 report

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