INFORMATION FOR CORPORATES

The Government is extending refunds of indirect tax (including GST, fuel and alcohol taxes) under the Indirect Tax Concession Scheme for the Square Kilometre Array Observatory, Bangladesh, Costa Rica, El Salvador, the Taipei Economic and Cultural Office, the Netherlands and Pacific Trade Invest.

The Government will make minor amendments to the start date of certain components of the 2022–23 March Budget measure “Streamlining excise administration for fuel and alcohol package.”

The Government will permanently abolish 457 tariffs from 1 July 2024 on a wide range of imported goods including toothbrushes, hand tools, fridges, dishwashers, clothing, and menstrual and sanitary products. Most of these goods already enjoy tariff preferences or concessions and the abolition of the tariffs is largely to save compliance costs.

Finally, the Government is no longer proceeding with integrity measures that would have allowed the Australian Business Registrar to cancel a person’s Australian Business Number for failing to meet certain tax-related lodgement obligations. 

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Wage compliance considerations (including superannuation) were addressed but not in detail:

• $27.5m over four years from 2024–25 (and $7m per year ongoing) to enable the Office of the Fair Work Ombudsman to continue targeting non-compliance with the “Fair Work Act 2009” by large corporate employers.
• $20.5m over four years from 2024–25 (and $5.1m per year ongoing) to boost funding for the Office of the Fair Work Ombudsman to support small business employers to comply with recent changes to workplace laws.
• The Government will provide $1.1bn over five years from 2023–2024 (and $0.6bn per year ongoing) to strengthen Australia’s government-funded Paid Parental Leave (PPL) scheme.
• Strengthening tax compliance. The Government will provide $187m over four years from 1 July 2024 to the ATO to strengthen its ability to detect, prevent, and mitigate fraud against the tax and superannuation systems.
• $60m towards the productivity, education and training fund to support practical activities by employer and worker representatives to boost workplace productivity and engage in tripartite cooperation. This will also support workplaces to implement policy changes such as the introduction of payday superannuation.
• Recalibration of the Fair Entitlements Guarantee Recovery Program to pursue unpaid superannuation entitlements owed by employers in liquidation or bankruptcy.

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The Budget introduces very limited new initiatives or proposed changes in relation to corporate and international taxation, other than announcing a new penalty regime for royalties paid to non-residents and flagging an intention to extend CGT for non-residents.

New SGE Penalty Regime for Royalties

The introduction of a new penalty regime to apply from 1 July 2026 to significant global entities (SGEs)—with more than $1bn in global turnover annually—that are found to have ‘mischaracterised or undervalued’ royalty payments, to which royalty withholding tax would otherwise apply.

While no details have been provided as to what ‘mischaracterised’ might mean, the measure appears to follow recent efforts of the ATO to extend the definition of royalty to a much wider set of circumstances and the ATO’s win in the recent Federal Court decision in PepsiCo (under appeal).

Whilst the measure does not apply for over 12 months, the Government is allowing time for the development of the new rules and (hopefully) proper consultation with affected industries, especially in the software sector. 

Strengthening the Foreign Resident CGT Regime

The Government will strengthen the foreign resident CGT regime to ensure foreign residents pay tax in a broader range of circumstances. Currently, foreign residents are only required to pay tax on the divestment of assets in Australia that meet the criteria as Taxable Australian property (TAP), including indirect interests in TAP.

The Government will amend the following areas of CGT as it applies to foreign residents to:

• Clarify and broaden the types of assets that foreign residents will be liable for CGT.
• Amend the point-in-time ‘principal asset test’ to a 365-day testing period for the purpose of determining whether the non-resident holds an indirect interest in taxable Australian real property.
• Require foreign residents disposing of shares and other membership interests exceeding $20m in value to notify the ATO, prior to the transaction being executed.

These efforts to ‘clarify and broaden’ the assets that are taxable to foreign residents could act as a disincentive for foreign investors investing in Australian assets, especially institutional investors looking to invest capital on behalf of foreign investors in Australian companies. An expansion of the rules will also likely create tension with respect to the application of Australian double tax treaties with its treaty partners.

The new reporting requirements will likely place an additional burden on vendors selling assets, particularly for indirect sales of Australian property and shares held indirectly through non-resident entities. This could also lead to delays in completing  M&A transactions.

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The 2024-25 Federal Budget heralds funding programs to incentivise the shift to low-emissions energy production. 

The Australian Renewable Energy Agency (ARENA) has been tasked with a suite of new funding programs to administer, green hydrogen production continues to be a focus and the critical and battery minerals sector is clearly in the spotlight.

Key energy and resources sector programs include:

• New tax incentives for critical minerals and hydrogen production.
• An additional $1.3bn round of the Hydrogen Headstart Program to bridge the green premium for early-mover hydrogen projects.
• The $1.7bn Future Made in Australia Innovation Fund, supporting innovative projects in green hydrogen, green metals, low-carbon fuels and other clean energy technologies.
• A further $1.5bn to support ARENA’s core funding programs, which invest in renewable energy and related technologies.
• The $835.6m Solar Sunshot Program to promote the development of Australian solar manufacturing capabilities.
• The $523.2m Battery Breakthrough Initiative to promote battery manufacturing capabilities.
• Additional loan and investment finance for critical minerals projects through established mechanisms such as the Critical Minerals Facility and the Northern Australia Infrastructure Facility.

A number of these initiatives fall under the recently announced Future Made In Australia agenda. The agenda is designed to strengthen domestic capability in key sectors, particularly in relation to Australia’s energy transition.

Economic resilience in regional Australia also received attention, with funding announcements relating to:

• A $188.7m Community Jobs and Business Fund to support regional development and employment.
• Further rounds of the Remote Airstrip Upgrade and Regional Airports Programs.
• The allocation of Future Drought Fund resources to a suite of resilience initiatives for the agriculture sector.

The Government has committed $1.4bn to the Medical Research Future Fund (MRFF) in addition to the existing $5bn commitment over the next 13 years, continuing the Fund’s investment into medical research in Australia.

Following the release of the Defence Industry Development Strategy earlier in the year, the Budget confirms the establishment of the Defence Industry Development Grant program. The $165.7m program replaces several prior defence sector grants for small-to-medium enterprises and is similarly designed to support Australian businesses to respond to Defence capability requirements.
 

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