Tax changes revealed in this week's budget announcement tops the list of budget measures to impact firms.
International business transactions will be on the increase as a result of this week’s budget, predicted King & Wood Mallesons partner, Richard Snowden. In his opinion, the number of internationals doing business in Australia will require legal services navigating through the changes to international business tax arrangements.
“Law firms that specialise in international business are likely to see extra work coming out of the 2015-16 Budget,” he said.
“The government announcement to impose a new anti-avoidance measure for large foreign companies selling into the Australian market - which will include substantial reporting by those companies on their foreign operations - will mean that those companies will need assistance in not only reviewing the impact of the legislation but also in dealing with the Regulators.”
He noted that changes to the GST may also affect international businesses operating in Australia leading to further regulatory work in the professional services sector.
While much of the post budget analysis has commented that treasurer Joe Hockey didn’t announce too many surprises, John Walker, who heads up Baker & McKenzie’s tax practice, commented that this week’s budget didn’t deliver on all the tax rumours.
“The rumour mill churned out a number of measures that never made it into the budget,” he said.
"The ATO’s effective tax rate disclosure regime, as reported in the press recently, was not announced in the budget. Superannuation was left untouched, the imputation system and deductibility of interest have been left on the table for the time being, and the Government pursued other measures in lieu of a diverted profits tax. Whether these options are re-visited remains to be seen.”
Agribusiness lawyers will potentially see an increase in work with the government announcing a push to strengthen foreign investment in agriculture.
“The Government's proposed strengthening of the foreign investment framework particularly in relation to agriculture will also mean greater complexity for foreign investors seeking to purchase Australian real estate and businesses,” said Snowden.
“This is in the context of the need to seek further foreign capital towards the proposed $50bn investment in infrastructure which is likely to occur over the next few years.”
Following 2014’s infrastructure-heavy budget, which committed $50bn to infrastructure over seven years, Allens infrastructure and transport sector leader Emma Warren observed that this year’s budget offered few new commitments.
“The commitments in this year's Budget come off the back of last year's Budget, where there were significant infrastructure spending commitments,” said Warren.
“We do need to keep in mind when judging this year's Budget that the Federal Government has reiterated its commitment to a $50bn infrastructure investment program over seven years including funding commitments for the key projects referred to in last year's Budget. These projects include WestConnex, the Toowoomba Second Range Crossing, Gateway Motorway North, the Pacific Highway upgrade, Adelaide's North South Corridor, Perth Freight Link, Gateway WA and NorthConnex.”
Allens energy, resources and infrastructure partner David Donnelly also flagged infrastructure investment for northern Australia as an area to watch: “Certainly the most interesting of these announcements is the establishment of a $5bn Northern Australian concessional loan facility to make money available on a concessional basis for the construction of ports, pipelines, electricity and water infrastructure across Northern Australian, comprising WA, NT and QLD, along with funding to draw up eligibility criteria and establish the lending products,” Donnelly said.
“The funding of a scoping study into the management, operations and future ownership of the Australian Rail Track Corporation (ARTC) is also likely to be of interest to infrastructure investors.”
The new budget may not have a significant impact on M&A deals over the next financial year, with Herbert Smith Freehills partner Simon Haddy predicting no significant changes. However, he did note a grey area over the new international business tax, the impact of which will be better understood over time.
“We are still considering the detail of the ‘Google Tax’ to properly understand the potential breadth of its application, but we doubt it will put the handbrake on transactions generally,” he said.
He also noted that the stability and consistency may boost transactional confidence and the heightened opportunities for investment that the budget will bring.
“The moves towards the privatisation of the ASIC Registry Business, and potentially the ARTC, provide opportunities for large and interesting transactions,” he said. “The positive developments on the tax treatment of employee share and option arrangements should provide increased opportunities for management buy-ins.”