Paving the way for Australia’s infrastructure sector - The 2017 National Infrastructure Conference

by Cheryl Goh, FTI *

The first ATO Taxpayer Alert for the year has packed a punch for Australia’s infrastructure sector. Following the controversial release of Taxpayer Alert TA 2017/1 and the hotly anticipated draft of the Australian Tax Framework, stapled structures are now, more than ever, on the ATO watch list. How will TA 2017/1 impact stapled groups and their investors? Amidst the uncertainty, advisers are left to fill in the blanks once more.  Industry leaders and senior members of the ATO will converge in May at The Tax Institute’s National Infrastructure Conference 2017 to shed some light on the tax treatment of stapled structures.

ATO’s approach to stapled structures

Investment in infrastructure is critical for the Australian economy and governments are increasingly looking to the private sector to develop essential infrastructure assets to attract sufficient capital investment and boost economic growth. Stapled structures play an important part in this.

Stapled structures have been around for the last 30 years and it is no secret that the use of these structures offers tax advantages to certain investors when compared with the use of a company structure for the same type of investment. The ATO, however, are not after traditional stapled structures. What they are coming for are arrangements that are entered into for the dominant purpose of obtaining a tax benefit.

In light of this, Deputy Commissioner Jeremy Hirschhorn, CTA (ATO) will deliver his keynote address on the ATO’s current approach in managing infrastructure and privatisation transactions. His session will focus on the ATO’s approach to stapled structures, the draft Australian Tax Framework (the Framework) and negative control in the context of Division 6C.

In his keynote session, Darren Anderson (BIS Oxford Economics) will speak on the challenges of long-term economic forecasting in infrastructure transactions. He will consider the requirements of debt and equity participants and sector-specific variations.

Bumpy road ahead for infrastructure groups

TA 2017/1 is a loud warning to stapled infrastructure groups and their investors who attempt to re-characterise trading income into passive income to attract concessional tax treatment. The recently released Framework reinforces this by highlighting the ATO’s concern with investors endeavouring to exploit the tax benefits of stapled structures inappropriately.

While the Framework provides broad guidance on the indicia of structures which may attract the Commissioner’s attention, there is little detailed explanation of ‘tax benefits’ and what makes them inappropriate in a Part IVA context. In their session, Stuart Dall (Pitcher Partners) and Peter Walmsley (ATO) will examine how Part IVA might apply to stapled structures. The relevance of other integrity measures such as Division 6C and the NALI rule will also be considered.

FIRB and privatisation: join the debate

The Institute’s conference program is tailored to address all the topical issues that affect the infrastructure industry. Privatisation issues, debt/equity rules, the Division 855 and Division 6C interaction and Part IVA are just a few of the topics that presenters will speak on.

This year, panel discussions on privatisation and FIRB are sure to be highlights. With speakers representing the ATO as well as industry, these sessions will no doubt spark plenty of robust debate.

Facilitated by Steven Economides, CTA (KPMG), the privatisation panel session will be a discussion between the ATO and two equity investors focusing on the interaction with the FIRB, value allocation, gearing across the staple and margins on cross staple loans and their interaction with the AMIT rules.

The FIRB panel session, facilitated by Wendy Rae (Allens), highlights the process by which FIRB decisions are made and will explore the key areas of focus from the ATO’s perspective, the impact of TA2017/1 on FIRB applications and the ATO and FIRB interaction.

Join us

The Tax Institute’s NationalInfrastructure Conference is the only conference in Australia focused entirely on tax issues affecting infrastructure. It’s a pertinent time to register for our conference given the uproar that was TA 2017/1 and the uncertainty it has caused for the tax treatment of stapled structures.

Find out more about what’s on offer in the program (PDF) and join us at the Sheraton, Melbourne, 25-26 May 2017. We look forward to seeing you there.

* Cheryl Goh, FTI, is The Tax Institute's Tax Content Consultant

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