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.

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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.

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