(i) an amount would have been allowed or would be allowable to the relevant taxpayer as a deduction in relation to a year of income if the scheme had not been entered into or carried out, being an amount that was not allowed or would not, but for this subsection, be allowable, as the case may be, as a deduction to the relevant taxpayer in relation to that year of income; and
(ii) it is fair and reasonable that that amount or a part of that amount should be allowable as a deduction to the relevant taxpayer in relation to that year of income;
determine that that amount or that part, as the case may be, should have been allowed or shall be allowable, as the case may be, as a deduction to the relevant taxpayer in relation to that year of income; or
(c) if, in the opinion of the Commissioner:
(i) a capital loss would have been incurred by the relevant taxpayer during a year of income if the scheme had not been entered into or carried out, being a capital loss that was not incurred or would not, but for this subsection, be incurred, as the case may be, by the relevant taxpayer during that year of income; and
(ii) it is fair and reasonable that the capital loss or a part of that capital loss should be incurred by the relevant taxpayer during that year of income;
determine that the capital loss or the part, as the case may be, should be incurred by the relevant taxpayer during that year of income; or
(ca) if, in the opinion of the Commissioner:
(i) an amount would have been allowed, or would be allowable, to the relevant taxpayer as a loss carry back tax offset if the scheme had not been entered into or carried out, being an amount that was not allowed or would not, apart from this subsection, be allowable, as the case may be, as a loss carry back tax offset to the relevant taxpayer; and
(ii) it is fair and reasonable that the amount, or a part of the amount, should be allowable as a loss carry back tax offset to the relevant taxpayer;
determine that that amount or that part, as the case may be, should have been allowed or is allowable, as the case may be, as a loss carry back tax offset to the relevant taxpayer; or
(d) if, in the opinion of the Commissioner:
(i) an amount would have been allowed, or would be allowable, to the relevant taxpayer as a foreign income tax offset if the scheme had not been entered into or carried out, being an amount that was not allowed or would not, apart from this subsection, be allowable, as the case may be, as a foreign income tax offset to the relevant taxpayer; and
(ii) it is fair and reasonable that the amount, or a part of the amount, should be allowable as a foreign income tax offset to the relevant taxpayer;
determine that that amount or that part, as the case may be, should have been allowed or is allowable, as the case may be, as a foreign income tax offset to the relevant taxpayer; or
(da) if, in the opinion of the Commissioner:
(i) an amount would have been allowed, or would be allowable, to the relevant taxpayer as an innovation tax offset if the scheme had not been entered into or carried out, being an amount that was not allowed or would not, apart from this subsection, be allowable, as the case may be, as an innovation tax offset to the relevant taxpayer; and
(ii) it is fair and reasonable that the amount, or a part of the amount, should be allowable as an innovation tax offset to the relevant taxpayer;
determine that that amount or that part, as the case may be, should have been allowed or is allowable, as the case may be, as an innovation tax offset to the relevant taxpayer; or
(e) if, in the opinion of the Commissioner:
(i) an amount would have been allowed, or would be allowable, to the relevant taxpayer as a junior minerals exploration incentive tax offset if the scheme had not been entered into or carried out, being an amount that was not allowed or would not, apart from this subsection, be allowable, as the case may be, as a junior minerals exploration incentive tax offset to the relevant taxpayer; and
(ii) it is fair and reasonable that the amount, or a part of the amount, should be allowable as a junior minerals exploration incentive tax offset to the relevant taxpayer;
determine that that amount or that part, as the case may be, should have been allowed or is allowable, as the case may be, as an exploration development incentive tax offset to the relevant taxpayer; or
(f) if, in the opinion of the Commissioner:
(i) an amount of a franking credit would have arisen, or would arise, in the franking account of the relevant taxpayer in relation to an exploration credit, being an amount that did not arise, or would not, apart from this subsection, have arisen, as the case may be, in the franking account of the relevant taxpayer in relation to the exploration credit; and
(ii) it is fair and reasonable that the amount, or a part of the amount, should arise, in the franking account of the relevant taxpayer in relation to the exploration credit;
determine that that amount or that part, as the case may be, should have arisen, or arises, as the case may be, in the franking account of the relevant taxpayer in relation to the exploration credit or
(g) if, in the opinion of the Commissioner:
(i) an amount would have been allowed, or would be allowable, to the relevant taxpayer as a refundable R&D tax offset, or a non‑refundable R&D tax offset, in relation to a year of income if the scheme had not been entered into or carried out, being an amount that was not allowed or would not, apart from this subsection, be allowable, as the case may be, as a refundable R&D tax offset, or a non‑refundable R&D tax offset, as the case may be, to the relevant taxpayer in relation to that year of income; and
(ii) it is fair and reasonable that the amount, or a part of the amount, should be allowable as a refundable R&D tax offset, or a non‑refundable R&D tax offset, as the case may be, to the relevant taxpayer;
determine that that amount or that part, as the case may be, should have been allowed or is allowable, as the case may be, as a refundable R&D tax offset, or a non‑refundable R&D tax offset, as the case may be, to the relevant taxpayer in relation to that year of income; or
(h) if, in the opinion of the Commissioner:
(i) an amount would have been allowed, or would be allowable, to the relevant taxpayer as a CMPTI tax offset if the scheme had not been entered into or carried out, being an amount that was not allowed or would not, apart from this subsection, be allowable, as the case may be, as a CMPTI tax offset to the relevant taxpayer; and
(ii) it is fair and reasonable that the amount, or a part of the amount, should be allowable as a CMPTI tax offset to the relevant taxpayer;
determine that that amount or that part, as the case may be, should have been allowed or is allowable, as the case may be, as a CMPTI tax offset to the relevant taxpayer; or
(i) if, in the opinion of the Commissioner:
(i) an amount would have been allowed, or would be allowable, to the relevant taxpayer as a hydrogen production tax offset if the scheme had not been entered into or carried out, being an amount that was not allowed or would not, apart from this subsection, be allowable, as the case may be, as a hydrogen production tax offset to the relevant taxpayer; and
(ii) it is fair and reasonable that the amount, or a part of the amount, should be allowable as a hydrogen production tax offset to the relevant taxpayer;
determine that that amount or that part, as the case may be, should have been allowed or is allowable, as the case may be, as a hydrogen production tax offset to the relevant taxpayer;
and the Commissioner shall take such action as he or she considers necessary to give effect to any such determination.
(4) Where the Commissioner makes a determination under subsection (3) by virtue of which an amount is allowed as a deduction to a taxpayer in relation to a year of income, that amount shall be deemed to be so allowed as a deduction by virtue of such provision of this Act as the Commissioner determines.
(5) Where, at any time, a taxpayer considers that the Commissioner ought to make a determination under subsection (3) in relation to the taxpayer in relation to a year of income, the taxpayer may post to or lodge with the Commissioner a request in writing for the making by the Commissioner of a determination under that subsection.
(5A) Subsection (5B) applies if the taxpayer considers that the Commissioner ought to make the determination under subsection (3) because the Commissioner has made a DPT assessment in respect of a taxpayer in relation to a scheme to which this Part applies.
(5B) Despite subsection (5), the request may be posted to or lodged with the Commissioner only after the end of the period of review (within the meaning of section 145‑15 in Schedule 1 to the Taxation Administration Act 1953) for the DPT assessment.
(6) The Commissioner shall consider the request and serve on the taxpayer, by post or otherwise, a written notice of the Commissioner’s decision on the request.
(7) If the taxpayer is dissatisfied with the Commissioner’s decision on the request, the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953.
177G Amendment of assessments
Nothing in section 170 prevents the amendment of an assessment at any time if the amendment is for the purpose of giving effect to subsection 177F(3).
177H Diverted profits tax—objects
(1) The primary objects of the DPT provisions are:
(a) to ensure that the Australian tax payable by significant global entities properly reflects the economic substance of the activities that those entities carry on in Australia; and
(b) to prevent those entities from reducing the amount of Australian tax they pay by diverting profits offshore through contrived arrangements between related parties.
(2) In addition, the DPT provisions (in combination with Division 145 in Schedule 1 to the Taxation Administration Act 1953) have the object of encouraging significant global entities to provide sufficient information to the Commissioner to allow for the timely resolution of disputes about Australian tax.
177J Diverted profits tax—application
Scheme for a purpose including obtaining a tax benefit etc.
(1) This Part also applies to a scheme, in relation to a tax benefit (the DPT tax benefit) if:
(a) a taxpayer (a relevant taxpayer) has obtained, or would but for section 177F obtain, the DPT tax benefit in connection with the scheme, in a year of income; and
(b) it would be concluded (having regard to the matters in subsection (2)) that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for a principal purpose of, or for more than one principal purpose that includes a purpose of:
(i) enabling the relevant taxpayer to obtain a tax benefit, or both to obtain a tax benefit and to reduce one or more of the relevant taxpayer’s liabilities to tax under a foreign law, in connection with the scheme; or
(ii) enabling the relevant taxpayer and another taxpayer (or other taxpayers) each to obtain a tax benefit, or both to obtain a tax benefit and to reduce one or more of their liabilities to tax under a foreign law, in connection with the scheme;
whether or not that person who entered into or carried out the scheme or any part of the scheme is the relevant taxpayer or is the other taxpayer or one of the other taxpayers; and
(c) the relevant taxpayer is a significant global entity for the year of income mentioned in paragraph (a); and
(d) a foreign entity is an associate (within the meaning of section 318) of the relevant taxpayer at any time in the year of income mentioned in paragraph (a); and
(e) that foreign entity:
(i) is the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme; or
(ii) is otherwise connected with the scheme or any part of the scheme; and
(f) the relevant taxpayer is not any of the following:
(i) a managed investment trust (within the meaning of the Income Tax Assessment Act 1997);
(ii) an entity covered by paragraph 275‑20(4)(f) of that Act (foreign collective investment vehicle with a wide membership);
(iii) an entity covered by paragraph 275‑20(4)(h) of that Act (entity owned by foreign government etc.) that is a foreign entity;
(iv) a complying superannuation entity (within the meaning of that Act);
(v) a foreign pension fund (within the meaning of that Act); and
(g) it is reasonable to conclude that none of the following sections apply in relation to the relevant taxpayer, in relation to the DPT tax benefit:
(2) For the purposes of paragraph (1)(b), have regard to the following matters:
(a) the matters in subsection 177D(2);
(b) without limiting subsection 177D(2), the extent to which non‑tax financial benefits that are quantifiable have resulted, will result, or may reasonably be expected to result, from the scheme;
(c) the result, in relation to the operation of any foreign law relating to taxation, that (but for this Part) would be achieved by the scheme;
(d) the amount of the tax benefit mentioned in paragraph (1)(b).
Deferral of foreign tax liabilities
(3) For the purposes of paragraph (1)(b), a deferral of a taxpayer’s liabilities to tax under a foreign law is taken to be a reduction of those liabilities, unless there are reasonable commercial grounds for the deferral.
Modification where thin capitalisation provisions apply
(4) Subsection (5) applies if:
(a) Division 820 of the Income Tax Assessment Act 1997 (about thin capitalisation) applies to the relevant taxpayer for the year of income mentioned in paragraph (1)(a); and
(b) the DPT tax benefit includes all or part of a debt deduction (within the meaning of that Act); and
(c) the calculation of the amount of the DPT tax benefit involves applying a rate to a debt interest (within the meaning of that Act).
(5) For the purposes of the DPT provisions, in calculating the amount of the DPT tax benefit, apply the rate to the debt interest the entity actually issued (rather than the debt interest that would have existed if the scheme had not been entered into or carried out).
Modification where foreign entity is CFC
(6) Subsection (6A) applies if:
(a) the foreign entity mentioned in paragraph (1)(d) is a CFC (within the meaning of Part X); and
(b) an amount of attributable income (within the meaning of that Part) of the foreign entity has been included as a result of the operation of that Part in the assessable income of:
(i) the relevant taxpayer; or
(ii) an associate (within the meaning given by section 318) of the relevant taxpayer, if the associate is a Part X Australian resident (within the meaning of that Part) and is not a trust or partnership.
(6A) For the purposes of the DPT provisions, reduce the DPT tax benefit to the extent to which the amount included in assessable income as mentioned in paragraph (6)(b):
(a) would not have been so included if the scheme had not been entered into or carried out; and
(b) is directly referable to the DPT tax benefit.
Schemes outside Australia
(7) This section applies whether or not the scheme has been or is entered into or carried out in Australia or outside Australia or partly in Australia and partly outside Australia.
Non‑limitation in relation to other provisions in this Part
(8) This section:
(a) does not limit section 177D, 177DA, 177E, 177EA or 177EB; and
(b) is not limited by those sections.
177K Diverted profits tax—$25 million income test
(1) This section applies in relation to the relevant taxpayer, in relation to the DPT tax benefit, if the sum of the following does not exceed $25 million:
(a) the assessable income of the relevant taxpayer for the year of income mentioned in paragraph 177J(1)(a);
(b) the exempt income of the relevant taxpayer for that year of income;
(c) the non‑assessable non‑exempt income of the relevant taxpayer for that year of income;
(d) the assessable income of each entity covered by subsection (2) for that year of income;
(e) if the DPT tax benefit is a tax benefit mentioned in paragraph 177C(1)(a)—the amount of the DPT tax benefit.
(2) An entity is covered by this subsection if for the year of income mentioned in paragraph 177J(1)(a):
(a) the entity is an associate (within the meaning given by section 318) of the relevant taxpayer; and
(b) both the entity and the relevant taxpayer:
(i) are members of the same global group; and
(ii) are significant global entities because they are members of that group.
177L Diverted profits tax—sufficient foreign tax test
(1) This section applies in relation to the relevant taxpayer, in relation to the DPT tax benefit, if the amount worked out under subsection (2) (foreign tax liability) equals or exceeds 80% of the amount worked out under subsection (6) (reduced Australian tax liability).
Foreign tax liability
(2) The amount is the total of the increases in liability for foreign income tax (within the meaning of the Income Tax Assessment Act 1997) of each entity covered by subsection (5) that results, will result, or may reasonably be expected to result, from the scheme during a foreign tax period that corresponds to the year of income mentioned in paragraph 177J(1)(a).
(3) The regulations may provide for a method of working out increases in foreign tax liability for the purposes of subsection (2):
(a) for all situations; or
(b) for specified situations.
(4) If the regulations provide for such a method, apply that method in working out increases in foreign tax liability for the purposes of subsection (2) in relevant situations.