TAX COMPLIANCE

Preventing "dividend washing" and doubling-up of franking credits

The Treasurer announced that the Government will close a loophole that enables sophisticated investors to engage in "dividend washing" (known as dividend double-dipping). Currently, sophisticated investors can engage in "dividend washing" to effectively trade franking credits. This can result in some shareholders receiving two sets of franking credits for the same parcel of shares.

This is outside the intent of the dividend imputation system. The Government will consult on the development of legislation to prevent this practice.

CGT integrity measures for foreign residents

The Government will make changes to the ''principal asset'' test in the tax law to ensure that indirect Australian real property interests are taxable if disposed of by a foreign resident. It will also apply a 10% non-final withholding tax to the disposal by foreign residents of certain taxable Australian property.

Funding for data-matching and trust tax compliance

The Government will provide the ATO with:

• $77.8 million over four years to improve compliance by Australian taxpayers by expanding data-matching with third party information; and

• $67.9 million over four years for the ATO to undertake compliance activity in relation to trust structures. A trusts taskforce will target the exploitation of trusts to conceal income, mischaracterise transactions, artificially reduce trust income amounts and underpay tax. It will focus on taxpayers "involved in egregious tax avoidance and evasion" involving trusts.