Click here to see the Assistant Treasurer’s media release no. 157.
The Government announced in the 2010 Budget that it would phase down the IWT payable when interest is paid by Australian subsidiaries and branches of foreign financial institutions on borrowings from their overseas parent, as well as when interest is paid by Australian-owned financial institutions on borrowings from related parties overseas, and any financial institution borrowing under offshore retail deposits which they on-lend in Australia.
The measures do not extend to offshore borrowings by entities that are not financial institutions. Corporate borrowers would still need to rely on existing IWT exemptions, such as for publicly offered debt under section 128F of the Income Tax Assessment Act 1936.
Click here to see our Budget Overview 2010 which provides further information on the 2010 Budget announcement.
The following table summarises the current IWT position and new timeline for the IWT phase down.
The 2010 Budget indicated an “aspirational target” of zero IWT for financial institutions borrowing from foreign financial institutions and from offshore retail deposits, but that was said to be subject to the Government’s medium-term fiscal strategy. Given today’s announcement, that aspirational target appears more distant.