Crying over too many income tax cuts, rethinking company tax cuts and calling to reconsider super tax concession’ – a few of the signs of dithering in making up minds about tax cuts. And then comes the Business Tax Working Group unveiling a suite of options to support a 1 per cent company tax cut. This suggestion walks a tight rope between revenue neutrality in all tax changes and investment friendly business taxation .
Undeniably, with little capital formation in Australia, investment from abroad is the elephant in the room. Going by the current state of play the outlook looks rather unsteady for investment. Retrospective transfer pricing amendments have become law giving the Commissioner an additional power of assessment under the treaty provisions. This will allow transfer pricing adjustment to be made on a profit split basis in contrast to the transaction basis that was available up until now under Division 13. If your business is at a loss the Commissioner wants to know whether it is due to a transfer pricing benefit, leave alone your numerous other business troubles.
Thin capitalisation is also under scrutiny. The options suggested in the Discussion Paper go as far as reducing the safe harbor gearing levels. Then there is a fear that the recently introduced mining rent tax (MRRT) may not contribute as much as forecast to the budget due to the slump in commodity prices and reduced business investment.
Certainty in company taxation is continuing to escape the attention it deserves.