Back in July it was revealed that a draft tax ruling issued by the Australian Taxation Office (ATO) in March 2017 could allow “passive” family investment companies to claim tax refunds and deductions, opening the door for wealthy families to claim back hundreds of millions of dollars.
This draft ruling overturned the generally-accepted view that such family investment companies – which do not actively carry on a business – would not be eligible for the reduction in the company tax rate for small businesses from 30% to 27.5% over recent years.
Financial Services Minister, Kelly O’Dwyer, subsequently advised the ATO that the Federal Government’s tax cuts for small businesses were not meant to apply to passive family investment companies.
Today, The AFR reports that Ms O’Dwyer has released draft legislation to ban passive investment companies from accessing the company tax cuts:
Financial Services Minister Kelly O’Dwyer is headed for a fresh clash with the Coalition’s wealthy base…
Ms O’Dwyer on Monday announced that passive investment companies would not be given the corporate tax relief already flowing to small businesses.
Under draft legislation released alongside a call for submissions, the government proposes blocking a company from the lower tax rate if 80 per cent or more of its income is of a “passive nature (such as dividends and interest)…
“The Turnbull government is committed to lower taxes on business because we want to see them invest and grow,” said Ms O’Dwyer on Monday.
“These amendments will provide greater clarity about who qualifies for the lower company tax rate by excluding passive investment companies,” she said…
General manager of technical policy at the Institute of Public Accountants Tony Greco welcomed the government’s clarification… However, he added that there would be losers as well.
“Effectively people who are just receiving dividends, royalties, or have property investments housed in a company then they’re the ones who aren’t going to be able to take advantage of the lower tax rate,” Mr Greco said.
“I think that’s a good outcome and it provides much more certainty for tax payers,” he said.
Good to hear.
