The Multinational Anti-Avoidance Law (MAAL) has been enacted as part of the government’s efforts to combat tax avoidance by multinational companies operating in Australia.
The MAAL has been established to ensure that multinationals pay their fair share of tax on the profits earned in Australia. It is designed to counter the erosion of the Australian tax base by multinational entities using artificial and contrived arrangements to avoid the attribution of profits to a permanent establishment (PE) in Australia.
MAAL only applies to global entities with global income exceeding a$1 billion or a member of the accounting group with an annual global income exceeding A$1 billion.
It allows the Commissioner of Taxation the power to cancel any tax benefits the foreign entity, and its related parties.
It came into effect on 11 Dec, 2015. It applies to certain schemes on or after 1 January 2016, irrespective of when the scheme commenced.
Broadly, the new law will apply if under the scheme, or in connection with the scheme:
- A foreign entity makes certain supplies to an Australian customer
- An Australian entity, that is an associate of or is commercially dependent on the foreign entity, undertakes activities directly in connection with the supply
- Some or all of the income derived by the foreign entity is not attributable to an Australian PE and the principal purpose, or one of the principal purposes of the scheme, was to obtain an Australian tax benefit or to obtain both an Australian and foreign tax benefit.