Schemes limiting an entity’s presence in Australia

This draft Determination relates to the application of section 177DA ITAA 1936 and indicates that schemes designed to limit an entity’s taxable presence in Australia could fall within the scope of the general anti-avoidance rules in Part IVA ITAA 1936.

The purpose of section 177DA is to ensure that foreign multinational entities cannot avoid the taxation of business profits in Australia by avoiding having a taxable presence in Australia.

If the following features are present then the entity will be treated as having participated in a scheme that limits a taxable presence in Australia under section 177DA:

  • A foreign entity makes a supply to an Australian customer;
  • Activities are undertaken in Australia ‘directly in connection with’ the supply;
  • Some or all of those activities are undertaken by an Australian entity who is an associate of, or is commercially dependent on, the foreign entity;
  • The foreign entity derives ordinary or statutory income from the supply, some or all of which is not attributable to an Australian permanent establishment of the foreign entity

To find out more about the direct connection with the supply made to the Australian customer and the clear indication of condition that capture the activities that relates to you, come and talk to us Tax Ideas Accountants & Advisers   Tel: (02) 8318 1545

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