Senate

Revised Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Josh Frydenberg MP)

Chapter 6 Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Treasury Laws Amendment (Making Sure Foreigners Pay Their Fair Share of Tax and Other Measures) Bill 2019

Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2018

Income Tax Rates Amendment (Sovereign Entities) Bill 2018

6.1 These 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.

Overview

6.2 Schedules 1 and 5 to Treasury Laws Amendment (Making Sure Foreigners Pay Their Fair Share of Tax and Other Measures) Bill 2019 amend the ITAA 1997, the ITAA 1936 and the TAA 1953 to improve the integrity of the income tax law for arrangements involving stapled structures and to limit access to tax concessions for foreign investors by increasing the MIT withholding rate on fund payments that are attributable to non-concessional MIT income to a rate equal to the top corporate tax rate.

6.3 An amount of a fund payment will be non-concessional MIT income if it is attributable to income that is:

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MIT cross staple arrangement income;

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MIT trading trust income;

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MIT agricultural income; or

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MIT residential housing income.

6.4 Schedule 2 to Treasury Laws Amendment (Making Sure Foreigners Pay Their Fair Share of Tax and Other Measures) Bill 2019 amends the ITAA 1997 to improve the integrity of the income tax law by modifying the thin capitalisation rules to prevent double gearing structures.

6.5 Schedule 3 to Treasury Laws Amendment (Making Sure Foreigners Pay Their Fair Share of Tax and Other Measures) Bill 2019 amends the ITAA 1936 to improve the integrity of the income tax law to limit access to tax concessions for foreign investors by limiting the withholding tax exemption for superannuation funds for foreign residents.

6.6 Schedule 4 to Treasury Laws Amendment (Making Sure Foreigners Pay Their Fair Share of Tax and Other Measures) Bill 2019 amends the ITAA 1936 and the ITAA 1997 to improve the integrity of the income tax law to limit access to tax concessions for foreign investors by codifying and limiting the scope of the sovereign immunity tax exemption.

6.7 The Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2018 makes consequential amendments to the Income Tax (Managed Investment Trust Withholding Tax) Act 2008 to specify that the MIT withholding rate on income attributable to non-concessional MIT income is 30 per cent.

6.8 The Income Tax Rates Amendment (Sovereign Entities) Bill 2018 makes consequential amendments to the Income Tax Rates Act 1986 to specify that sovereign entities are liable to income tax on taxable income at a rate of 30 per cent.

Human rights implications

6.9 These Bills do not engage any of the applicable rights or freedoms.

Conclusion

6.10 These Bills are compatible with human rights as they do not raise any human rights issues.