Supplementary Explanatory Memorandum
(Circulated by authority of the Assistant Minister for Competition, Charities and Treasury, the Hon Dr Andrew Leigh MP)Glossary
This Supplementary Explanatory Memorandum uses the following abbreviations and acronyms.
| Abbreviation | Definition |
| Assessment Bill | Taxation (Multinational - Global and Domestic Minimum Tax) Bill 2024 |
| Consequential Bill | Treasury Laws Amendment (Multinational - Global and Domestic Minimum Tax) (Consequential) Bill 2024 |
| GloBE Rules | OECD GloBE Model Rules (as modified by the Commentary, Agreed Administrative Guidance and Safe Harbour Rules) |
| Group Entity | Group Entity as defined in the Assessment Bill |
| MNE | Multinational enterprise |
| MNE Group | MNE Group as defined in the GloBE Rules |
| TAA 1953 | Taxation Administration Act 1953 |
General outline and financial impact
Parliamentary Amendments to Taxation (Multinational - Global and Domestic Minimum Tax) Bill 2024 and Taxation (Multinational - Global and Treasury Laws Amendments (Multinational - Global and Domestic Minimum Tax) (Consequential) Bill 2024
Outline
The Parliamentary amendment to the Assessment Bill makes provision for the Rules to prescribe the meaning of Securitisation Entity, which the Consequential Bill refers to.
The Parliamentary amendments to the Consequential Bill insert additional provisions to ensure that references to a Group Entity do not include GloBE Securitisation Entities for the purposes of applying the general joint and several liability provisions in Subdivision 128-A in Schedule 1 to the TAA 1953. As a result, Securitisation Entities are not joint and severally liable for any top-up tax amounts of other Group Entities. This ensures that the assessment of whether a Securitisation Entity is insolvency-remote is not impacted by the operation of the joint and several liability provisions contained in Subdivision 128-A in Schedule 1 to the TAA 1953.
Date of effect
The Assessment Bill, as amended, commences on the day after the Bill receives Royal Assent. The Consequential Bill, as amended, is dependent on the Assessment Bill commencing, and in which case commences at the same time as the Assessment Bill.
Consistent with the Assessment Bill and the Consequential Bill, the Parliamentary amendments apply to Fiscal Years commencing on or after 1 January 2024.
Financial impact
The Parliamentary amendments are not estimated to impact the cost of the measure.
Human rights implications
The Parliamentary amendments do not affect the analysis of human rights issues. See Statement of Compatibility with Human Rights - Chapter 3.
Compliance cost impact
The compliance cost impact is unchanged.
Chapter 1: Parliamentary amendments to Treasury Laws Amendment (Multinational - Global and Domestic Minimum Tax) (Consequential) Bill 2024
Outline of chapter
1.1 The Parliamentary amendments to the Consequential Bill amend Subdivision 128-C in Schedule 1 to the TAA 1953 to preclude Securitisation Entities from being joint and severally liable for top-up tax liabilities of other Group Entities of the MNE Group.
1.2 This ensures that the assessment of whether a Securitisation Entity is insolvency-remote is not impacted by the operation of the joint and several liability provisions contained in Subdivision 128-A in Schedule 1 to the TAA 1953.
1.3 A Securitisation Entity will take the same meaning as the Assessment Bill.
Context of amendments
1.4 The Consequential Bill contains consequential and miscellaneous amendments that are necessary for the administration of Australian IIR/UTPR tax and Australian DMT tax.
1.5 Item 35 of the Consequential Bill inserts Subdivision 128-A into Schedule 1 to the TAA 1953.
1.6 Subdivision 128-A imposes joint and several liability for amounts payable under the Minimum Tax law onto Group Entities and certain joint ventures. These joint and several liability provisions are necessary to ensure the effective and efficient collection of top-up tax and other amounts payable by MNE Groups. The operation of these integrity provisions, which may involve the application of a number of these provisions sequentially, ensures that the Commissioner can collect on these tax-related debts in an efficient and timely manner.
1.7 The latest Administrative Guidance released by the OECD in June 2024, includes an option to allow jurisdictions to impose a Securitisation Entity's Domestic top-up tax liability on another Constituent Entity in the MNE Group to avoid impacting the risk of insolvency of such entities. Similar sentiments regarding the imposition of top-up tax amounts on Securitisation Entities were raised during a public hearing before the Senate Economics Legislation Committee in August 2024.
1.8 For Australia to achieve qualifying status with the Inclusive Framework members, the Minimum Tax law must be implemented in a manner consistent with the GloBE Rules and ongoing release of OECD Agreed Administrative Guidance. On this basis, the Parliamentary amendments to the Consequential Bill seek to mitigate the risk of qualifying status for Australia being jeopardised.
Detailed explanation of amendments
1.9 The Consequential Bill inserts new terms in the Dictionary definitions in Division 995-1 of the ITAA 1997. This definition aids the cohesiveness of the legislative package by aligning the meaning of a 'GloBE Securitisation Entity' with the Assessment Bill.
[Amendment 1, definition of GloBE Securitisation Entity]
1.10 The Parliamentary amendments insert a provision that excludes Securitisation Entities from being jointly and severally liable to top-up tax amounts of other Group Entities and certain joint ventures under Subdivision 128-A in Schedule 1 to the TAA 1953.
[Amendment 2]
Commencement, application, and transitional provisions
1.11 The Parliamentary amendments to the Consequential Bill commence at the same time as the Assessment Bill. However, these Parliamentary amendments do not commence at all if the Assessment Bill does not commence.
1.12 The Parliamentary amendments apply to income years beginning on or after 1 January 2024.
Chapter 2: Parliamentary amendment to Taxation (Multinational - Global and Domestic Minimum Tax) Bill 2024
Outline of chapter
2.1 The Parliamentary amendment to the Assessment Bill amends section 34 of the Assessment Bill to empower the Rules to provide a definition for 'Securitisation Entity'.
Context of amendments
2.2 The Assessment Bill implements the framework for imposition of top-up tax for the IIR, UTPR and the DMT, consistent with the GloBE Rules. This includes establishing defined terms for the purposes of applying the Minimum Tax law.
2.3 Risks impacting the insolvency-remote status of Securitisation Entities have been raised in the Administrative Guidance released by the OECD in June 2024, as well as during a public hearing before the Senate Economics Legislation Committee in August 2024.
2.4 For Australia to achieve qualifying status with the Inclusive Framework members, the Minimum Tax law must be implemented in a manner consistent with the GloBE Rules and ongoing release of OECD Agreed Administrative Guidance. On this basis, the Parliamentary amendment to the Assessment Bill seeks to mitigate the risk of qualifying status for Australia being jeopardised.
Detailed explanation of amendments
2.5 An empowering provision to define Securitisation Entity in the Rules is included at section 34 of the Assessment Bill.
[Amendment 1, definition of Securitisation Entity]
Commencement, application, and transitional provisions
2.6 The Parliamentary amendment to the Assessment Bill commences on the day after Royal Assent and applies to income years beginning on or after 1 January 2024.
Chapter 3: Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Parliamentary amendment to Taxation (Multinational - Global and Domestic Minimum Tax) Bill 2024
Parliamentary amendments to Treasury Laws Amendment (Multinational - Global and Domestic Minimum Tax) (Consequential) Bill 2024
Overview
3.1 The Parliamentary amendments to the Bills are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
3.2 The Parliamentary amendment to the Assessment Bill empowers the Rules to define Securitisation Entity.
3.3 The Parliamentary amendments to the Consequential Bill ensure that references to a Group Entity in Subdivision 128-A in Schedule 1 to the TAA 1953 do not include a GloBE Securitisation Entity. This has the effect of Securitisation Entities not being jointly and severally liable to pay top-up tax or other amounts payable by other Group Entities. The Parliamentary amendment to the Assessment Bill empowers the Rules to define Securitisation Entity.
Human rights implications
3.4 The Parliamentary amendments to the Bills do not engage any of the applicable rights or freedoms and do not affect the initial analysis of human rights issues conducted for the Bills.
Conclusion
3.5 The Parliamentary amendments to the Bills are compatible with human rights as the amendments do not raise any human rights issues.