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Key takeaways
- Deferral of amendments to expand income tax general anti-avoidance rules to income years commencing on or after Royal Assent.
- Continued funding and additional powers for the ATO.
- Abolition of “nuisance” tariffs from 1 July 2024
- Deferral of commencement of excise streamlining measures.
- Continued investment in the Simplified Trade System.
Deferral of amendments to income tax general anti-avoidance rules
The start date of the 2023-24 Budget proposal to expand the income tax general anti-avoidance rules in Part IVA of the Income Tax Assessment Act 1936 will be deferred so it applies to income years commencing on or after the day the amending legislation receives Royal Assent, rather than it applying to income years commencing on or after 1 July 2024 as was originally proposed.
As a reminder, these amendments will expand the application of Part IVA so that it can apply to:
- schemes that reduce tax paid in Australia by accessing a lower withholding tax rate on income paid to foreign residents, and
- schemes that achieve an Australian income tax benefit, even where the dominant purpose was to reduce foreign income tax.
These amendments will apply regardless of whether the scheme was entered into before or after the relevant start date.
Funding and additional powers for the ATO
Continuing a theme from recent years, the Budget contains additional funding for the Australian Taxation Office (ATO) to extend the following compliance programs:
- the Personal Income Tax Compliance Program for one year from 1 July 2027
- the Shadow Economy Compliance program for two years from 1 July 2026, and
- the Tax Avoidance Taskforce for two years from 1 July 2026 which has a focus on multinationals, large public and private businesses, and high-wealth individuals.
The ATO will also receive funding to strengthen its ability to detect, prevent and mitigate fraud against the tax and superannuation system over four years from 1 July 2024.
In addition, to strengthen the ATO’s ability to combat fraud, the ATO will be given an extended time to notify a taxpayer if it intends to retain a business activity statement (BAS) refund for further investigation, increasing the current notification period from 14 days to 30 days. This measure will take effect from the start of the first financial year after enactment of the enabling legislation. Any legitimate refunds retained for over 14 days would result in the ATO paying interest to the taxpayer (as is currently the case). The ATO will also publish BAS processing times online.
The Government will also amend the tax law to give the Commissioner of Taxation a discretion to not use a taxpayer’s refund to offset outstanding tax debts where the Commissioner has put that old tax debt on hold prior to 1 January 2017. This discretion will apply to individuals, small businesses and not-for-profits only.
Abolition of nuisance tariffs
As already announced, from 1 July 2024, the Government will abolish 457 nuisance tariffs, at a cost of $41 million over five years from 2023–24. This move marks the largest unilateral tariff reform in two decades and is designed to boost productivity, reduce red tape, and simplify the tariff system.
This reform is expected to save Australian businesses around $30 million per year in compliance costs. By eliminating these tariffs, the Government aims to enhance economic efficiency and foster greater international trade competitiveness.
Streamlining of excise administration measures
The Government has confirmed that the streamlining of excise administrative measures, including the streamlining of licence applications and renewal requirements, will commence the later of 1 July 2024 or the day following Royal Assent. The changes were initially intended to apply from 1 July 2023, were deferred by 12 months in last year’s Budget, and have now been potentially deferred once again. The previously announced requirement for the ATO to publish on its website a public register of excise licences and excise equivalent warehouse licences will apply from 30 days following commencement of legislation.
The measures relating to the removal of regulatory barriers applying to bunker fuels for commercial shipping industries will now apply from 1 January 2025 (instead of 1 July 2024).
Support for Ukraine – extending duty free access for goods imported from Ukraine
In its continued support for Ukraine, the Government has extended a broad-based duty exemption on Ukrainian goods for a further two years, through to 3 July 2026. This duty exemption provides for the duty-free treatment of goods that are produced or manufactured in Ukraine. Excise and excise-equivalent duties will still apply to alcohol, fuel, tobacco and petroleum products imported from Ukraine.
Funding to support the implementation of the Defence Trade Controls Amendment Act 2024
The Government will provide $28 million over four years from 2024-25 (and $1.2 million per year ongoing) to support the implementation of the Defence Trade Controls Amendment Act 2024. The funding will support upgrades to the Department of Defence’s export permit information and communications technology system and education activities for Australian industry and academia to support compliance with new requirements given the significance of the changes introduced by the new legislation.
In addition to providing a national exemption to the United Kingdom and the United States from Australia’s export control permit requirements, the Defence Trade Controls Amendment Act 2024 strengthened the Defence export control regime to protect Australia’s military technologies, streamline defence trade and collaboration with AUKUS partners, and accelerate the delivery of Defence capabilities.
In order to strike an appropriate balance between protecting Australia’s national security interests and supporting economic growth and research collaboration, the Defence Trade Controls Amendment Act 2024 provides for certain exceptions to certain persons and activities that potentially impacted businesses should consider.
Continued investment in the Simplified Trade System
The Government will provide an additional $29.9 million over four years from 2024–25 (and $1.0 million per year ongoing) to continue initiatives to improve cross-border trade by enhancing border and biosecurity risk assessments and government to business trade data sharing, including delivering the simplified trade system reforms and a Digital Trade Accelerator program.
Other measures
- The Australian Border Force will receive funding to deliver a coordinated multi-agency, multi-jurisdictional response to the illicit tobacco trade, in conjunction with Commonwealth, state, and territory partners (this follows the announcement of lower-than-expected collections of tobacco excise for 2023-24).
- Funding will be provided over two years from 2024-25 for border enforcement activities relating to an import ban on engineered stone products.
- Additional funding will be provided over four years from 2024-25 to support the Payment Times Reporting Regulator to implement reforms recommended by the statutory review of the Payment Times Reporting scheme, including increased resourcing for the Regulator and upgrading the Regulator’s technology infrastructure.
- The Government will undertake a strategic examination of Australia’s research and development system to strengthen its alignment with Australia’s priorities and improve innovation and research and development outcomes.
- Additional funding will be provided to support the progression of the Government’s workplace relations agenda, including funding to enable the Office of the Fair Work Ombudsman to support small business employers to comply with recent changes to workplace laws and to continue targeting non-compliance with the Fair Work Act 2009 by large corporate employers.
- The Government will no longer proceed with the 2019-20 Budget measure to strengthen the Australian Business Number system as integrity issues are being addressed through enhanced administrative processes implemented by the ATO.
Paul Cornick
Nick Maley
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