Diverted Profits Tax Act 2017

What this law does, mechanically

• The Act creates a new tax called the "diverted profits tax" and imposes liability for it by reference to another law. The Act does not itself set out how the tax is calculated; it states that tax is payable in accordance with section 177P of the Income Tax Assessment Act 1936 (s3). The Act sets the tax rate at 40% (s4).

When the law starts

• The Act’s provisions only start at the same time as a specific item (item 13 of Schedule 1) in another Act (the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Act 2017). If that other item never commences, this Act does not commence at all. The commencement entry records 1 July 2017 as the operative date (s2 and the commencement table).

Who is affected and who decides

• Who must pay is determined by the rules in section 177P of the Income Tax Assessment Act 1936; this Act merely imposes the tax payable under that section (s3). Parliament chose the tax rate (s4) and linked the start of this Act to the commencement mechanics of another legislative item (s2).

Why it matters (mechanics and effects)

• By imposing a 40% tax rate on profits that fall under s177P, the Act increases the tax charge that entities captured by s177P will face (s3, s4).
• The Act delegates the substantive definition, calculation and application of the tax to s177P in the Income Tax Assessment Act 1936 (s3). That means the operational rules, taxpayer obligations, and any exemptions or thresholds are located in that other provision, not in this Act.