CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.


Australia Consults On Taxation Of Stapled Structures

by Mary Swire,, Hong Kong
30 March 2017

The Australian Treasury has launched a consultation on the tax consequences of the re-characterization of trading income derived through the use of stapled structures.

According to the Treasury's consultation document, "Over recent years there has been growth of arrangements to re-characterize trading income into more favorably taxed passive income which can have the effect of reducing the Australian tax applicable to that income in the hands of non-resident investors. The use of these arrangements, most commonly in the form of transactions within stapled structures, has grown significantly and expanded into new sectors, beyond their traditional use in the property and infrastructure sectors."

The Treasury said that stapled structures are created when "two or more securities are contractually bound together, such that they are not able to be bought or sold separately."

The document explains that the Treasury wishes to understand how Australia's tax system may have contributed to the use of stapled structures and other arrangements to re-characterize trading income. It adds that the Government intends to remove tax distortions and is keen to "develop a process for the transition of existing arrangements to any modified tax rules."

The consultation document outlines a number of policy options for removing the tax advantages of stapled arrangements, including:

  • Disallowing certain deductions for cross-staple payments by companies or Division 6C trusts (including rentals, interest, royalties, and synthetic equity payments) to Division 6 trusts (potentially treating the income as non-assessable non-exempt for the trust);
  • Taxing the recipient of such payments (either the trustee or foreign investor) at a rate equivalent to the Australian company tax rate; or
  • Deeming stapled entities to be consolidated for tax purposes.

The document also asks whether, if the tax advantages of stapled arrangements are removed, Australia would need a specific Real Estate Investment Trust regime to provide clarity for flow through tax treatment for real estate investments.

The consultation closes on April 20.


Treaty Updates by Territory

Latest Treaty Updates

Hungary - Kyrgyzstan

Hungary and Kyrgystan have begun DTA negotiations, the Hungarian Ministry of Foreign Affairs and Trade announced on February 28, 2018.

Morocco - Cape Verde

Morocco and Cape Verde will begin DTA negotiations in March 2018, Morocco's Tax Agency announced.

Mexico - Saudi Arabia

The DTA signed between Mexico and Saudi Arabia entered into force on March 1, 2018, following the publication in Mexico's official Gazette of a law ratifying the agreement on February 26, 2018.

Bangladesh - Morocco

Bangladesh and Morocco signed a DTA on March 1, 2018.

Pakistan - Philippines

Meeting over two days ending February 28, 2018, representatives from Pakistan and the Philippines agreed to renegotiate their DTA.

United Kingdom - Mauritius

The UK and Mauritius signed a DTA on February 28, 2018.

Singapore - Tunisia

Singapore signed a DTA with Tunisia on February 27, 2018.

Bahrain - Philippines

Bahrain's King, Hamad bin Isa Al Khalifa, has approved a law ratifying the DTA Protocol signed with the Philippines, state media reported on February 20, 2018.

Luxembourg - Oman

The Luxembourg Government on February 23, 2018, reported it is pushing for the negotiation of an amended DTA with Oman.

Mexico - Jamaica

According to a monthly update from the Mexican Government, Mexico's DTA with Jamaica entered into force on February 24, 2018.

Switzerland - Various

According to preliminary media reports, Switzerland's upper house of parliament of February 26, 2018, approved laws to ratify the DTAs signed with Kosovo and Pakistan and a Protocol with Latvia.

Luxembourg - Various

The Luxembourg Government announced that it is engaged in DTA negotiations with 15 countries, in a January 29, 2018, update, including newly DTA negotiations with the UK.

Ireland - Ghana

Ireland and Ghana signed a DTA on February 7, 2018.

Iran - Various

According to a statement from the President's office, Iran's Cabinet on February 18, 2018, approved the signing of DTAs with Sweden, Lithuania, and Japan.

Philippines - Various

On February 19, 2018, the Philippines Senate adopted three resolutions ratifying agreements for the avoidance of double taxation with Mexico, Thailand, and Sri Lanka.

Japan - Spain

Japan and Spain have agreed a DTA in principle, to replace their existing pact, the Japanese Ministry of Foreign Affairs announced February 21, 2018.

Armenia - Iraq

The Armenian Ministry of Finance said February 22, 2018, that a DTA had been initialed after four days of negotiations with Iraq.

India - Kenya

India's Ministry of Finance on February 22, 2018, revealed that an updated DTA between India and Kenya had been published in the Official Gazette, to replace the agreement in place between the two countries since 1985.

South Africa - Brazil

South Africa's DTA Protocol with Brazil entered into force on February 10, 2018.

Moldova - Georgia

Moldova's Cabinet on January 31, 2018, approved a law to ratify the DTA signed with Georgia in November 2017.

Kazakhstan - Azerbaijan

According to preliminary media reports, Kazakhstan's Senate on February 15, 2018, approved a law to ratify a Protocol to the DTA with Azerbaijan.

Poland - Ethiopia

Poland published an order in its Official Gazette on February 8, 2018, to bring the DTA signed with Ethiopia in 2015 into force. The agreement entered into force on February 14, 2018.

Paraguay - Qatar

Paraguay's Government on February 11, 2018, announced the signing of a DTA with Qatar.

Guernsey - Portugal

Guernsey's TIEA with Portugal will enter into force March 15, 2018, according to a February 20, 2018, update from the Guernsey Government.

Botswana - Zimbabwe

The Botswana Government has announced that the country will sign a DTA Protocol with Zimbabwe by the end of the year.

More Treaty Updates