Submission:

Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2017

29 September 2017

BDO welcomes the opportunity to provide feedback in response to Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2017 (‘Exposure Draft’), released by the Treasury on 18 September 2017, which clarifies that corporate tax entities with predominantly passive income cannot access the base rate entity corporate tax rate.

This BDO submission identifies the following issues as outlined in the Appendix to our submission:

  • clarification is required as to whether a company with subsidiaries in receipt of passive income can in effect convert it into an active non-portfolio dividend for the company;
  • a reference to net capital gains needs to be included in the definition of 23AB – ‘meaning of base rate entity passive income’, as they are required to determine the net amount in working out assessable income;
  • franking credits need to be included in the definition of 23AB – ‘meaning of base rate entity passive income’, with an example to illustrate this point;
  • a definition of ‘attributable’ needs to be included in the legislation, with clarification on the extent to which a taxpayer needs to trace through more than one trust or partnership;
  • an exception needs to be provided for rents or royalties received derived in the active conduct of a trade or business;
  • capital gains on the sale of active business assets should be excluded from passive income;
  • application of the legislation needs to be extended to the 2015/16 financial year;
  • the definition of ‘aggregate turnover’ needs to exclude ‘base rate passive income’; and
  • the Exposure Draft is lacking in examples.