US Tax Reform and the impact on Australian businesses

Whether you are an Australian business with existing operations in the US or looking to establish a foothold there, the impact of the US tax reform agenda will warrant very close consideration. While there may well be benefits arising, there may also be some disadvantages and unintended consequences.

The US Federal Government is on the verge of legislating its much anticipated tax reform agenda, likely by the end of this week. At its core, this will result in a significant reduction in the income tax burden for US corporations and individuals, but the devil is in the detail. 

In summary, the tax reform bill will:

• generally make it more attractive for Australian businesses to operate in the United States following a reduction in the corporate tax rate to 21% from 35%, and repealing the corporate Alternative Minimum Tax.
• impose a substantial one-off tax cost on US companies with foreign subsidiaries via the imposition of a one-time transition tax on unrepatriated foreign profits of 15.5% of cash or cash equivalent assets, and 8% on other assets.
• introduce a number of complex international tax proposals including minimum taxes on income on intangibles, Controlled Foreign Corporation rule changes and a base erosion tax on deductible payments to foreign related parties.

Australian businesses with US operations and Australian operations of US parent entities will also need to assess the impact of the proposed reforms on their Australian compliance and profit retention plans.

For more detail read Grant Thornton’s full coverage from the US, including a summary of the changes and how the reform will impact companies in the US and globally.

To discuss how these changes will affect your business, contact your local Grant Thornton advisor or: