CA ANZ and The Tax Institute (the Joint Bodies) have lodged a joint submission for the Senate Economics Legislation Committee inquiry into the Government Amendments on sheet RU100 (the Government Amendments) to Treasury Laws Amendment (Making Multinationals Pay Their Fair Share-Integrity and Transparency) Bill 2023 (the Bill). The Joint Bodies are pleased that the Government Amendments have addressed some of the concerns raised in our respective submissions to Treasury on the exposure draft Parliamentary Amendments to the Bill. These amendments include:

• allowing an entity to access excess tax EBITDA in other legal entities and not just eligible unit trusts and managed investment trusts, as this ensures that common controlling investment structures can continue to be funded by investor debt
• when applying the Third Party Debt Test, a debt holder can have recourse to minor and insignificant ineligible assets such as a non-Australian asset
• deferring the application date for the new Debt Deduction Creation Rules (DDCR) to income years starting on or after 1 July 2024.

However, we have ongoing concerns regarding the Bill and the Government Amendments which include:

• the application date of the thin capitalisation changes (being from 1 July 2023) (other than the DDCR) means that entities have been and will continue to be subject to the new rules for at least eight months without enacted legislation
• at a minimum, prior year tax losses as of 1 July 2023 (i.e. the application date) should be excluded from the tax EBITDA calculation as these losses would have been calculated under the existing thin capitalisation asset-based regime
• where a company chooses not to utilise the tax losses in a year under the FRT (for example, in cases involving stapled structures), there could potentially be a double counting of losses
• the impact on the tax EBITDA calculation for entities that receive dividends or distributions from 10% to up to 50% controlled entities and as such cannot utilise the proposed excess tax EBIDTA.

Given the significant impact of the proposed amendments, the Joint Bodies consider that it is crucial that the Government commits to a post-implementation review.