The Government has introduced the final stages to its reform of Taxation of Financial Arrangements (TOFA), assistant treasurer Chris Bowen announced.
TOFA Stages 3 and 4 provides a comprehensive framework for taxing financial arrangements by reducing tax distortions and anomalies.
The measures contain rules that cover tax timing treatments for financial arrangements, including elective tax timing and character hedging rules that are designed to minimise tax timing and character mismatches.
The rules permit eligible taxpayers to elect to have financial arrangements taxed on a fair value or retranslation basis, or to rely on their financial reports for taxation purposes.
These elections create compliance cost savings by more closely aligning tax treatment with accounting standards.
The legislation also includes integrity rules to address value shifting and non-arm's length dealings in relation to financial arrangements, Minister Bowen said.
"There has been substantial consultation on this bill over the last 12 months," he said.
"The input from stakeholders has greatly assisted in the development of this significant reform and the resolution of many complex issues during the legislative design process."
Industry bodies such as the Investment and Financial Services Association (IFSA) welcomed the introduction of the legislation.
"The legislation will provide unprecedented clarity on the tax treatment of financial arrangements," IFSA chief executive Richard Gilbert said.
"This will act to reduce compliance costs for the financial services industry."
The tax rules will apply for income years commencing on or after July 1, 2010.
