Government has introduced reforms to tackle the challenges of tax base erosion and profit shifting, assistant Treasurer David Bradbury said.
The Tax Laws Amendment (countering tax avoidance and multinational profit shifting) Bill 2013 amends the general anti-avoidance rule (Part IV) and the Transfer Pricing regime.
The Part IV amendments target schemes that may comply with technical requirements of the law but which are run mainly to avoid tax.
It aligns Australia's transfer pricing rules with internationally accepted principles of the Organisation for Economic Co-operation and Development (OECD).
The OECD, on Tuesday, called for greater international cooperation on corporate tax. An OECD study commissioned by the G20 found that some multinationals used strategies that allowed them to pay as little as 5 per cent in corporate taxes while smaller businesses paid up to 30 per cent.
"These strategies, though technically legal, erode the tax base of many countries and threaten the stability of the international tax system," OECD secretary-general Angel Gurria said.
She said the report was an important step in ensuring global tax rules were equitable and responded to G20 requests for the OECD to provide solutions to the global economic crisis.
Bradbury said the amendments would protect $1 billion per year.
"When multinationals don't pay their fair share, they gain an unfair advantage over domestic companies and disadvantage Australian taxpayers, who must make up the tax shortfall or accept fewer government services," he said.
The Treasurer will discuss improving Australia's business tax system at the G20 Finance Ministers meeting this week.
