Budget 2017: “Black economy”, multinationals in spotlight as government focuses on tax integrity

The federal government has pledged to create more fairness for businesses and “level the playing field” through a series of budget measures directed at tackling Australia’s so-called “black economy”.

The government gave its “black economy taskforce” the job of investigating how individuals and businesses use cash payments in December 2016, and the government has used the federal budget to respond to the taskforce’s interim report.

Changes for courier and cleaning businesses

As part of this response, the government will extend the existing taxable payments reporting system (TPRS) to contractors in the courier and cleaning sectors.

Under the TPRS, which already operates in the building and construction sector, businesses must report payments made to contractors, individually and as an annual total, to the Australian Taxation Office.

The government says the system has resulted in improved compliance among building and construction contractors and it hopes it will have the same effect in courier industries.

The government has proposed the measure would come into effect in 2018, which means businesses in those industries would need to start collecting information from July 1, 2018, ahead of the first annual report being required in August 2019.

The budget measure is expected to deliver $318 million in revenue to the government over the forward estimates, with underlying cash receipts forecast to come in at $362 million over the same period.

Software crackdown

The government has also announced plans to ban the manufacture, distribution, possession, use and sale of point of sale (POS) software that can allow businesses to understate the income they report to the Australian Taxation Office.

So-called “sales suppression” technology and software allows businesses to delete selected transactions from their POS systems in a way that cannot be traced, according to the government.

The government will need to legislate in order to bring in the ban and it said in the budget that the ban would then come into effect once the legislation receives Royal Assent.

The 2017 budget also commits $32 million in funding for the ATO to extend audit and compliance programs associated with the black economy, which were due to expire in June, and agreed to a recommendation from the taskforce to develop a proposal to “promote good tax behaviour” in its own procurement processes.

Further action on multinational tax avoidance

Meanwhile, the government has committed to a number of measures designed to address tax avoidance by multinational corporations.

The existing Multinational Anti-Avoidance Law will be extended to cover corporate structures that use foreign partnerships and trusts, which will be backdated to the law’s commencement date of January 1, 2016.

Multinational banks and insurance companies will also be targeted by “anti-hybrid mismatch rules” that will attempt to stop them from exploiting different tax arrangements between counties that change how their regulatory capital is treated.

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