[World Tax News] Australia Releases Consultation Paper Amending Foreign Resident Capital Gains Tax Regime and More

Editorial Team – [2024] 165 taxmann.com 73 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week.

1. Australia releases consultation paper amending foreign resident capital gains tax regime

The Australian Treasury Office has released two public consultations concerning the foreign resident capital gains tax regime. This includes strengthening the regime and improving the withholding tax regime thereon.

(a) Strengthening the foreign resident capital gains tax regime

The Australian Government announced a measure in the 2024–25 Budget to strengthen the foreign resident capital gains tax regime. This measure comprised 3 complementary elements to ensure that Australia can tax foreign residents on direct and indirect disposals of assets with a close economic connection to Australian land and natural resources.

The measure will also improve the certainty of foreign investors’ Australian tax outcomes by aligning Australia’s tax law more closely with the Organisation for Economic Co-operation and Development’s Model Tax Convention on Income and Capital. The measure also aligns the treatment for non-residents more closely with the tax treatment that already applies to Australian residents. The amendments apply to capital gains tax events commencing on or after 1 July 2025.

The responses to this consultation can be submitted up until 20 August 2024.

(b) Improving the foreign resident capital gains withholding tax regime

The Australian Governmentannounced a measure to increase the integrity of the foreign resident capital gains withholding (FRCGW) regime. This measure increases the FRCGW rate for relevant CGT assets from 12.5 per cent to 15 per cent and removes the current $750,000 threshold before withholding applies for transactions involving either taxable Australian real property or an indirect Australian real property interest that provides company title interests.

These changes will apply to acquisitions of relevant CGT assets made on or after the later of 1 January 2025 and the commencement of this measure.

The responses to this consultation can be submitted up until 05 August 2024.

Source: Strengthening the foreign resident capital gains tax regime
Improving the foreign resident capital gains withholding tax regime

2. Australia to set up a working group for implementing Pillar Two global and domestic minimum tax

The Australian Taxation Office has announced setting up a special purpose working group to support consultation on implementing Pillar Two global and domestic minimum tax in Australia for multinational businesses.
Through consultation, the working group will seek feedback on administrative aspects of the implementation of this new measure, including:

• The design of 2 new Australian tax returns, keeping in mind domestic requirements for an approved form to enable assessment and collection of a Top-up Tax:

1. 1. Australian Income Inclusion Rule and Undertaxed Profits Rule tax return (AIUTR)
   2. Domestic minimum tax return (DMTR)

• The resources, systems and processes that multinational businesses are considering, or may already have in place, in response to the announced measure, including system builds and services provided by software designers;
• Support implementation through public advice and guidance and co-designing client engagement approaches.

Source: Announcement by Australian Taxation Office

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