Canberra hopes to raise up to $4.35 billion over the next four years through measures that include a new taskforce led by the ATO, steep penalties for tax dodgers and tighter rules to close loopholes that multinational companies have been exploiting.
The government will spend $679 million over four years to establish a taskforce targeting multinationals, private companies and rich people.
The taskforce - to be led directly by the ATO commissioner and staffed by 1,300 tax office workers, will pursue cases of deliberate tax avoidance and evasion.
The government will also beef up its Multinational Tax Avoidance Law (MAAL), which came into effect on January 1, with a new diverted profits tax to impose a 40 per cent penalty tax rate on multinationals attempting to shift their Australian profits offshore.
The new tax is based on Britain's "Google tax" which targets multinationals that avoid paying tax by shifting profits to lower taxing countries.
In Australia, corporate giants including BHP Billiton have been identified as using so-called marketing hubs in Singapore to help reduce their tax bill in Australia.
"Everyone has to pay their fair share of tax, especially large corporates and multinationals, on what they earn here in Australia," Treasurer Scott Morrison said.
The new tax, in conjunction with MAAL, could raise up to $650 million over four years from large multinationals. The tax avoidance taskforce, in turn, is expected to raise more than $3.7 billion.
Other measures include putting in place new rules by January 1, 2018 to close loopholes allowing multinationals to exploit differences in tax treatment across different countries.
An example could be that a loan from a parent company to its subsidiary could be treated as equity under one country's tax laws but as debt in another. As a result, the subsidiary may be able to claim a tax deduction for interest payments made to its parent for the loan but the parent would not pay any tax on them.
The government will also update laws to close loopholes for related-party transactions to shift profits overseas and reduce tax paid in Australia.
And whistleblowers who help expose companies and individuals trying to dodge the tax man will be given increased protection.
Multinational tax avoidance has been the subject of heated public debate over the past year as global mining and tech giants come under the ATO's radar over the use of various structures to avoid paying taxes in Australia.
The issue has turned into a hot button topic ahead of the federal election, with the Opposition promising stringent laws to raise revenue and cut the deficit.
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