Federal Budget 2018-19 | International tax

By admin - May 8, 2018

Australian tax residents and foreign individuals working in Australia should be mindful of announced changes to income attribution rules, which will seek to tax fame and image rights income to individuals personally from 1 July 2019.

Read: Access full Federal Budget 2018-19 review here

Tax measures affecting actors, sportspersons and the film industry

This tightening of the rules is accompanied by a small carrot in the form of additional funding for Australia’s local film and related industries.

The Government has announced it will be providing $140 million over four years to attract foreign investment in film production and related industries, complementing the existing ‘Location Offset’ component of the Australian Screen Production Incentive tax rebate, and providing support for Australia’s film industry.

In contrast, the budget targets high profile individuals (including actors and sportspersons) who licence their fame or image rights to related entities. The proposed measures seek to tax such individuals personally on income generated under these arrangements from 1 July 2019.

There is no detail at present regarding how the measures will be introduced. While we query the appropriateness of this proposal, it would seem sensible to incorporate them into Australia’s existing Personal Services Income rules, which already capture certain acting income and appearance fees.

The use of image rights licensing companies is often a commercial necessity. Therefore, we note that such rules will need to allow those licensing their image rights (through companies) to claim foreign income tax offsets personally for any foreign tax paid on this income.

Additional integrity measures for multinationals

The Budget demonstrated the Government’s ongoing commitment to ensuring multinationals pay their fair share of tax, by expanding the definition of Significant Global Entities (SGE) and announcing the imminent release of a discussion paper on taxing digital business in Australia.

From income years commencing on or after 1 July 2018, the SGE definition will be expanded to include groups headed by private companies, trusts and partnerships. This closes a perceived loophole in the existing rules.

SGEs are exposed to a variety of enhanced compliance measures such as Country-by-Country reporting, the Multinational Anti Avoidance Law (MAAL), the diverted profits tax (DPT) and lodgement of general purpose financials, as well as enormous penalties.

In line with the OECD’s first BEPS action item, identifying appropriate tax rules to deal with digital business is high on the Government’s agenda. Over the past year the Government has been working with the G20 to bring the digital economy into the global tax net.

While no announcements were made in the Budget, the Treasurer announced a discussion paper will be released that explores options for taxing digital business in Australia. This consultation will be complex given the EU is struggling with reaching consensus in this area against the backdrop of tensions from the US.

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