Australia announces international tax measures, restrictions on foreign investment and stimulus

Overview

Australia has announced a range of measures in response to the COVID-19 crisis that broadly are consistent with the global response, including economic stimulus and cash flow support measures.  

However, measures specifically related to international tax and transactions include:

• administrative guidance around residency and permanent establishment (PE) issues arising due to travel restrictions;
• changes in the Foreign Investment Review Board (FIRB) framework for assessing transactions; and
• stimulus measures that could affect cross-border transactions, including accelerated depreciation and instant asset write-offs.

The takeaway

Practical responses to COVID-19 measures can have international tax consequences. While the ATO’s advice is welcome, companies may want to consider carefully the impact of travel restrictions on Australian PE risk or corporate residency.

Australia’s FIRB process changes increase the number of transactions that will require FIRB approval or notification. Where FIRB approval is required, companies may want to consider preparing for expected ATO queries.

Finally, stimulus measures may increase the present value of capital expenditure, but companies may also need to confirm their eligibility.