Australia: two of the toughest laws, leaked from the inside

Australia wrote two of the most aggressive targeted anti-avoidance laws in the world. Then a partner at one of the firms advising the government on those laws leaked the confidential plans to colleagues, who used them to help clients get ahead of the law before it landed. The defence and the breach came from the same room.

The gap, made public: the Senate inquiry

The Senate Economics References Committee was referred an inquiry into Corporate Tax Avoidance on 2 October 2014. On 8 April 2015, executives from three large US technology and software firms appeared and denied that their structures amounted to avoidance. The committee's chair and the leader of a minor party pressed one of them on its international holding structure, accusing it of running an international tax avoidance structure. The companies' position was that they complied with all applicable laws; committee members put to them the mismatch between the revenue they earned in Australia and the tax they paid there. The final report, "Corporate Tax Avoidance, Part III: Much heat, little light so far," was tabled on 30 May 2018, and recommended that the worldwide gearing ratio become the only permitted method for calculating interest deductions, closing a safe harbour companies were exploiting.

The Australian answer: MAAL and the Diverted Profits Tax

Australia built two targeted laws in quick succession. The Multinational Anti-Avoidance Law came into force on 11 December 2015 for schemes from 1 January 2016. It targets Significant Global Entities, those with annual global income of A$1bn or more, that structure their supply arrangements so a foreign entity earns Australian-source income without a taxable presence in Australia. When multinationals restructured around it using foreign trusts and partnerships, a 2017 to 2018 Budget measure was passed to capture those too.

The Diverted Profits Tax followed, effective 1 July 2017, and it is harder than the UK's. It applies to Significant Global Entities at a 40% penalty rate, against the standard 30% company rate. It bites where an arrangement produces an effective tax mismatch (the 80/20 rule: less than 80% of the Australian tax being paid offshore), where it is reasonable to conclude the arrangement was designed to reduce tax, and where it lacks economic substance. Like the UK version it is not self-assessed: the Tax Office issues an assessment, then a 60-day response period and a 12-month review run before appeal rights arise. Behind both sits Part IVA of the Income Tax Assessment Act 1936, Australia's long-standing general anti-avoidance provision, which applies a sole-or-dominant-purpose test and overrides Australia's tax treaties.

The ATO's Tax Avoidance Taskforce, established in 2016, has driven the collection. It reports revenue effects of around A$37.6bn since July 2016 (as at 30 June 2025), and that the largest companies now pay around 94% of their tax voluntarily, rising to over 96% after compliance activity.

Australia has since adopted the OECD global minimum tax. Its Global Minimum Tax sets a 15% minimum effective rate on groups with consolidated annual global revenue above EUR 750m, through an Income Inclusion Rule and a domestic minimum tax, for income years beginning on or after 1 January 2024. Separately, the thin-capitalisation regime was overhauled: from 1 July 2023 the old safe-harbour debt test was replaced by a fixed-ratio test that caps net debt deductions at 30% of tax EBITDA, the interest-deduction reform the Senate inquiry had recommended.

The consulting-firm leak scandal

In 2015, a Big Four firm's Australian international tax chief, who was also a member of the government's Board of Taxation advisory group, breached confidentiality agreements by sharing secret Treasury information about the incoming Multinational Anti-Avoidance Law with colleagues at the firm. The firm used the advance intelligence to develop counter-strategies and market services to clients seeking to get ahead of the new law, earning at least A$2.5m in fees. Reporting based on the firm's internal emails, later released in redacted form by the Tax Practitioners Board, indicated the information reached dozens of partners and was used to advise around fourteen companies; the figures trace to those emails and the Senate inquiry rather than to a single official count, and the internal label "dirty thirty" was the firm's own, not an official designation.

The breach surfaced publicly in January 2023 when the Tax Practitioners Board terminated the partner's registration. The firm's Australian CEO resigned in May 2023 after it emerged he had been among those copied on the emails. A Senate committee (the Finance and Public Administration References Committee, in "A Calculated Breach of Trust," June 2023) found a deliberate strategy over many years to cover up the breach. On 6 August 2023 the government announced a reform package: stronger confidentiality obligations for advisers working with government, new sanctions and liability for large consulting firms, and enhanced whistleblower protections. The episode is the cleanest documented case anywhere of the revolving door between the firms that advise government on anti-avoidance law and the firms that advise companies on getting around it being, literally, the same people.

What Australia loses

Australia loses about $22.1bn a year ($22,132.9m) to cross-border corporate tax abuse, from the State of Tax Justice 2024 (data year 2021), which works out to roughly 1.3% to 1.4% of GDP, one of the heaviest relative losses of any wealthy country. Unlike the UK and Canada, Australia inflicts comparatively little on others (about $1.5bn, $1,538.9m), so it is close to a pure victim in this accounting rather than a conduit. Australia's own tax gap is separately estimated by the ATO at A$58.2bn, or 9.1%.

What an Australian small business can legitimately do

The Australian small-business toolkit is domestic. The $20,000 Instant Asset Write-Off lets eligible businesses (aggregated turnover under $10m) immediately deduct assets costing under that threshold, and the 2026 to 2027 Budget made the $20,000 level permanent from 1 July 2026. The R&D Tax Incentive gives a refundable offset of 43.5% for companies with turnover under $20m (calculated as the company tax rate plus 18.5%). Small-business Capital Gains Tax concessions and the franking-credit system, which prevents the double taxation of dividends, round it out. These reward investing and hiring inside Australia. They are not the diverted-profit structures the MAAL and DPT were built to stop, and a business with a single tax home cannot reach for those structures however much it might want to.