Client Alert

Denial of tax deductions: cross border payments for intangibles – discontinuation of measure

By:
Brett Curtis,
Yan Wong,
Emma Maguire
21 May 20242 min read
In the 2024-25 Federal Budget, the Government announced the discontinuation of previously announced rules to deny, from 1 July 2023, tax deductions for payments made by Significant Global Entity’s (SGEs) relating to intangible assets connected with low corporate tax jurisdictions.
Contents

In its place, the Government announced new measures to penalise, from 1 July 2026, SGEs that are found to have mischaracterised or undervalued royalty payments, to which royalty withholding tax would otherwise apply. 

The discontinuation is a sensible step to avoid potential duplication of rules following the introduction of the ‘Pillar Two’ Global Minimum Tax and Domestic Minimum Tax measures, which should broadly apply to combat tax avoidance using cross border intangible payments to low taxed jurisdictions.

Our 2024-25 Federal Budget commentary can be found here.

Our Client Alert of 25 March 2024 in respect of the Pillar Two exposure draft materials can be found here.

Our Client Alert of 6 April 2023 on this discontinued measure can be found here.

Learn more about how our Tax law services can help you
Visit our Tax law page
Learn more about how our Tax law services can help you
TAGS  
Authors
  • Brett Curtis
    Brett Curtis With over 30 years experience in the Australian, UK and New Zealand markets, Brett has expertise across a broad range of corporate and international taxation issues. View Profile
  • Yan Wong
    Yan Wong Yan has 25 years’ corporate and international tax experience with a number of Big Four and Mid-Tier International Chartered Accounting firms. View Profile
  • Emma Maguire
    Emma Maguire Emma supports large corporate entities, consolidated groups, superannuation funds and trust entities on income tax compliance. This includes liaising with various areas of the business, as well as with external regulatory bodies such as the Australian Taxation Office.

Related tax content

View more
ATO tightens country-by-country reporting exemptions: what you need to know
Client Alert ATO tightens country-by-country reporting exemptions: what you need to know
The ATO has tightened exemption criteria for country-by-country reporting, effective January 1, 2024. Taxpayers will need to submit more information, aligning with the ATO's focus on international tax risks and local file reporting.
Jason Casas
Christine Cornish
Keith To
| 5 min read | 19 Dec 2024
ATO announces significant changes to local file requirements
Client Alert ATO announces significant changes to local file requirements
The ATO has increased local file reporting requirements to better understand international tax risks. These changes apply from 1 January 2025, for periods starting on or after 1 January 2024. CbCREs will need more time and resources to comply.
Jason Casas
Christine Cornish
Keith To
| 5 min read | 19 Dec 2024
Pillar Two rules in Australia passed
Client Alert Pillar Two rules in Australia passed
Australia's Parliament has passed the Pillar Two rules, aligning with the OECD's global initiative to establish a 15% minimum tax rate for large multinational enterprises (MNEs).
Joseph Phan
Murat Cihanger
Vince Tropiano
| 5 min read | 10 Dec 2024
    View more