The passing of the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share – Integrity and Transparency) Bill 2023 through the Australian Senate has sparked concerns in the property sector, particularly regarding its potential impact on housing projects.
The bill aims to amend Australia’s thin capitalisation rules, with key changes including requiring Australian public companies to disclose subsidiary information and limiting debt deductions for multinational entities.
The Senate Economics Legislation Committee recommended passing the bill with government amendments.
Some of the key amendments made to the original bill include adding an ordering rule to prevent excessive denial of debt deductions and allowing certain entities to include excess thin capitalisation capacity.
The application of debt deduction creation rules will be deferred to income years starting on or after 1 July 2024.
Despite improvements from the original bill, concerns remain about its potential adverse impacts on taxpayers.
The Property Council of Australia has expressed disappointment, with Chief Executive Mike Zorbas stating that the legislation will deter international investment in key city building projects.
He emphasised the reliance on overseas investment to develop cities and highlighted the negative effects on domestic and overseas investment in city building assets.
Zorbas criticised the legislation: “What remains is a poorly targeted tax grab that blunts overseas and domestic investment in city building assets, and especially housing, across the country.
“The low point is that an Australian business, investing in Australia with only Australian assets and debt, can now be caught in profit-shifting prevention laws where there is no offshore jurisdiction to shift profit to.”
Despite supporting the integrity aims of the policy, Zorbas noted that the legislation’s practical effect differs significantly from its intent.
“We will continue to demonstrate the negative impacts of the legislation to fix its flaws and champion investment in our cities,” said Zorbas.
The Property Council of Australia plans to continue demonstrating the negative impacts of the legislation to push for changes that support investment in Australian cities.
