Federal Election 2019 Policy Series – How will the election affect Foreign Owned Subsidiaries?

Foreign owned subsidiaries tend to walk a fine line between complying and administering a parent company’s requests, while maintaining a workable Australian operation (from a legal and practical perspective).

This balancing act is compounded in Australia when a Federal election is called. The rules of the game will ultimately change depending on which of the major parties forms government and businesses, both domestic and foreign, will be impacted by those changes.

In readiness for the election on 18 May 2019, we identified key pledges affecting certain industries and areas of law affecting our foreign owned subsidiary clients.

Likely to be implemented by the party that forms government, the points below may affect the way your foreign owned subsidiary operates in Australia post 18 May.

Labor PoliciesLiberal/National Coalition Policies
Tax
- Focus is on crack down of overseas movement of profits and tax minimisation strategies.
- Crack down on the movement of profits offshore by multinationals.
- Apply fixed tax rate on distributions from family trusts to avoid tax minimisation strategies e.g. through distribution to lower taxed family members.
Tax
- Focus is on assisting SME businesses in Australia.
- Instant asset write-off for business increased from $25,000 to $30,000.00.  Will be accessible by businesses with a turnover of up to $50million.
- SME business tax rate is currently 27.5% and will be reduced to 25% by 2021-22 FY.
Employment and Migration
- Introduction of legislation preventing “permanent casuals”.
- Pledges to increase the award wage to a “living wage”.
- Reintroducing penalty rates for employees.
- Will limit the granting of skilled overseas worker visas to “genuine skill shortage” industries, and there will be a requirement that a business must seek to fill the position with local Australian workers prior to hiring an employee with a work visa.
- Labour hire companies will be required to provide workers with the same pay and conditions as those employed directly.
- Crack down on businesses avoiding obligations (e.g. superannuation contributions) by getting staff to register as independent contractors.
- 'Big business' will be forced to report on any gender pay gap publicly.
Employment
- Penalty rates for hospitality, retail and fast food workers will be removed.
Infrastructure & Government contracts
- Focus is on assisting and working with local rather than international business.
- Local businesses, particularly those located in outer suburban and regional areas, will be awarded government projects over international business.
- Public infrastructure projects will use Australian grade steel.
- Up to 3,000km of Queensland’s inland road network will be upgraded to make it easier for agricultural producers to get products to market.
- Widen and deepen Townsville Port, Australia’s largest sugar, zinc, lead, copper and fertiliser port.
- Build a dedicated heavy vehicle access road to the Port of Gladstone, which is Queensland’s largest multi-commodity port and the world’s fourth largest coal export terminal.
International Trade
- Focus is on increase in trade in the global marketplace.
- Prioritisation of a free trade agreement with the European Union
- Expansion of the Trans-Pacific Partnership
- Implementation of the India Economic Strategy
- It will seek a free trade agreement with the UK once Brexit is finalised
- It will strengthen the trade agreement with the 4 nation Pacific Alliance
- Provision of additional $60million for Export Market Development Grants
Climate and environment
- Extend the existing pollution cap which will affect 110 more businesses than existing thresholds, though the agricultural sector is excluded from this scheme.
- Implementation of carbon targets for all Australian business, though business may be able to apply industrial and international carbon offsets, to enable the Australian business to meet the carbon targets.
- INCENTIVE: Australian businesses can make money by reducing pollution below their baseline, and selling these ‘credits’ to third parties.
Pledges NOT to introduce:
- carbon pricing
- a carbon tax
- Pledges to establish a $300 million Strategic Industries Reserve Fund to support Emission intensive trade exposed industries in finding solutions to cut pollution and remain competitive.
Climate and environment
- Implementation of small business energy efficiency programs via the provision of $50 million in grant money to 'eligible businesses'.  There is up to $25,000.00 per grant available to install new energy efficient equipment or improve energy management in your business.
- Establishment of a Regional and Remote Communities Reliability Fund, which is targeted at agricultural and mining industries.  This entails $50.4 million in grants for up to 50 off-grid and fringe-of-grid communities and businesses to investigate the establishment of micro-grids.
Manufacturing
- Implementation of stronger measures to minimise the illegal dumping of cheap foreign products in the Australian market.
Tourism
- $1 billion local investment fund for implementing and investing in tourism projects in northern Australia (Western Australia, Queensland, and the Northern Territory).

To find out more about how the outcome of the Australian election could affect your business as a foreign owned entity, call us for advice.

This article was written by Mark Metzeling – Special Counsel, Commercial, Intellectual Property and Trade, with input from Eloise Preller – Associate, Commercial.