New Australian Tax Bill Will Simplify Tax On Foreign Earnings

by Mary Swire, Tax-News.com, Hong Kong

02 April 2004

New legislation introduced to the Australian parliament will simplify the taxation system for companies with offshore earnings by ensuring that they only pay a single layer of tax, according to the government.

Commenting on the New International Tax Arrangements (Participation Exemption and Other Measures) Bill 2004, parliamentary secretary to the Treasurer, Ross Cameron, noted: "The measures in this bill will directly assist Australian companies with foreign subsidiaries or branch operations by generally ensuring that they only pay one layer of (foreign) tax on the profits of those offshore operations as well as reducing compliance costs in many cases."

However, he added that “any passive or highly mobile income shifted to those offshore investments will continue to be taxed in Australia on an accrual basis."

The government is hoping that the changes in the tax law will make Australian firms more competitive overseas, and Mr Cameron explained that they are designed to help small, as well as large firms.

"The changes are not just relevant to big business with extensive offshore operations," he observed. “They will also assist those emerging Australian businesses looking to expand offshore to take advantage of global opportunities."

Additionally, the new law would allow firms to ignore capital gains from the sale of shares in a foreign subsidiary, and would also expand the application of foreign dividend exemption to all nations.

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