The Victorian Government has secured the passage of the Building Legislation and Treasury Legislation (Tax Relief) Amendment Bill 2026, introducing a suite of reforms aimed at improving consumer protection and confidence in the apartment market.

Resilience Insurance, Australia’s leading Latent Defects Insurance (LDI) provider, has welcomed the move.

The LDI elements of the Bill passed with bipartisan support and now moves to the Legislative Council where debate and passage are expected later this month. It represents a significant milestone in the national shift toward stronger, longer-term protection for apartment buyers.&nbsp;

The reform would deliver practical benefits across the housing system. Apartment owners will have stronger protection if major defects emerge, developers and builders will have a clearer quality framework to work within, and the State will reduce the risk of serious building failures becoming a long-term financial and social burden for households, communities and government.&nbsp;

LDI helps support apartment delivery while providing stronger protection for buyers and encouraging better construction outcomes.&nbsp;

Resilience LDI provides apartment owners with 10 years of insurance-backed cover for major structural defects from completion, with direct claim access to the insurer. This means owners are not required to first pursue developers or builders through costly legal action before accessing protection.&nbsp;

Resilience Insurance has been operating in Australia since 2022 and has already insured hundreds of development projects covering many thousands of apartments across Australia.&nbsp;

At approximately 1.8 per cent of build cost, it is a cost-competitive alternative to the traditional two per cent Strata Bond, bond while delivering significantly broader and longer protection.&nbsp;

“The Victorian Lower House vote shows that reforms like this succeed when they are practical, evidence-based and supported by industry," says Corey Nugent, CEO of Resilience Insurance.

"Victoria is moving quickly on a reform that will make a real difference for apartment buyers, while supporting better building outcomes and greater confidence in apartment delivery.

“This is step one. We look forward to the Bill completing its passage through the Legislative Council and to working with government and industry to implement the framework effectively.”&nbsp;

Fast Facts: What is Resilience LDI?&nbsp;

<ul>
	<li>Resilience Latent Defects Insurance (LDI): Covers major structural defects for 10 years from completion.&nbsp;</li>
	<li>Consumer-first: Direct claim access, no need for lengthy legal action.&nbsp;</li>
	<li>Cost advantage: At approximately 1.8% of build cost, LDI is typically priced below the traditional 2% Strata Bond while offering broader protection.&nbsp;</li>
	<li>Market leader: Resilience Insurance is the first approved LDI provider in NSW.</li>
</ul>

The Building Legislation and Treasury Legislation (Tax Relief) Amendment Bill 2026 has passed the Victorian Lower House, putting Victoria on track to become the first state to legislate an industry workable LDI framework as a formal alternative to the Strata Building bond. 

Joel Robinson

10-year Latent Defects Insurance for new apartment buyers set to land in Victoria

Just a few months after acquiring a prime Broadbeach site on the corner of First Avenue and Surf Parade, family-run developer <a href="https://www.apartments.com.au/developers/raptis">Raptis</a> has filed fresh plans for a new apartment development.

Raptis is seeking to deliver a <a href="https://www.apartments.com.au/new-apartments/17-19-first-avenue-broadbeach-qld-4217">29-storey tower with 73 apartments</a> on the 818 sqm site. It will be the developer's seventh project in the suburb, as they are approaching completion of The Sterling on George Avenue.

There will be a pool, barbecue and outdoor dining area, residents lounge and dining, sauna and steam room, gym, and a Yoga and Pilates studio.

<img alt="Raptis" data-entity-type="file" data-entity-uuid="b554da3f-7344-49aa-b1c9-44cf459af0d7" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-05%20at%2010.41.45%E2%80%AFAM.png?VersionId=zzjWu1iO1wnuYv4EV4fyOyf5nSXjGYut" />

Raptis Joint Managing Director, Evan Raptis, says they remain&nbsp;committed to developing quality infill sites across the Gold Coast in the lead-up to the 2032 Brisbane Olympics.

"This project continues our long track record of delivery in Broadbeach, and we look forward to bringing another premium development to this thriving precinct."

The announcement follows strong delivery momentum for Raptis, with The Sterling Broadbeach nearing completion and construction well underway on the final stage of the Waterpoint community adjacent to Harbour Town. The developer's continued investment in the Gold Coast reflects confidence in the region's apartment market fundamentals, underpinned by sustained Southeast Queensland population growth.&nbsp;

The outlook for the region is further bolstered by infrastructure investment tied to the Brisbane 2032 Olympic Games, which is expected to drive continued economic and population growth across the SEQ corridor.&nbsp;

Subject to a favourable response from Gold Coast City Council, construction on the new First Avenue tower is targeted to commence before the end of 2026.&nbsp;

Read more:&nbsp;<a href="https://www.apartments.com.au/news/qld/it-s-all-in-the-family-four-decades-later-raptis-continues-to-shape-the-gold-coast-skyline">It’s all in the family: Four decades later, Raptis continues to shape the Gold Coast skyline</a>

Read more: <a href="https://www.apartments.com.au/news/qld/raptis-secures-prime-surf-parade-site-for-next-broadbeach-apartment-development">Raptis secures prime Surf Parade site for next Broadbeach apartment development</a> 
&nbsp;

Gold Coast developer brings seventh Broadbeach project to market, targeting construction commencement before year end

First look: Raptis lodges plans for new 29-storey Broadbeach tower 

Brisbane development veteran Kevin Seymour's Seymour Group is set to deepen its presence on one of Brisbane's most tightly held riverfront addresses, lodging revised plans for a luxury apartment development on Oxlade, just a few doors down from The Oxlade, which it completed in 2024.

The <a href="https://www.apartments.com.au/new-apartments/70-72-oxlade-drive-new-farm-qld-4005">new project at 70-72 Oxlade Drive</a>, directly north of The Oxlade, will have 27 apartments across a seven-storey building&nbsp;overlooking the Brisbane River and Merthyr Park. It's a revision from a 2021-approved design.

Designed by bureau^proberts, the project has evolved from the previously approved 26-apartment scheme, introducing an additional penthouse level while maintaining a low-density, boutique character. The development will comprise 26 three-bedroom apartments and a single four-bedroom penthouse, supported by two basement levels with 86 car spaces and 34 bicycle spaces.

The architectural response is centred around two distinct building forms separated by a landscaped open-air atrium.&nbsp;"This dual composition captures and embraces Brisbane’s subtropical environment whilst breaking down built form and scale," the submission to the Brisbane City Council noted.

<img alt="First look: Seymour Group returns to Oxlade Drive with revised riverfront apartment plans in New Farm" data-entity-type="file" data-entity-uuid="c12d84d0-bc11-4067-b46f-5bd2d786a34d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/new%20farm%20landscape.png?VersionId=YEPc2k5CAdh6aAPlu4uVpgZadh4MEfRd" />

A defining feature of the design is a deep landscaped void running through the centre of the building, creating what bureau^proberts describes as a "natural ravine" that enhances airflow, daylight penetration and resident amenity. The design report notes that the separation of the two building volumes is intended to maximise natural light, cross-ventilation and outlook while strengthening connections to the surrounding riverfront setting.

Curved balcony edges, integrated planting and extensive landscaping throughout the façade reinforce the subtropical design approach. The building's façade is softened by elevated gardens and planter beds, creating a green edge that complements the established landscape character of Oxlade Drive and neighbouring Merthyr Park.

New Farm has become one of Brisbane's most sought-after suburbs for developers delivering premium downsizer-focused apartments.

GRAYA has been particularly active in the precinct, completing both Chalk and York in recent years, while construction of Moray House, being delivered for Spyre, is now nearing completion. Architect-turned-developer Joe Adsett recently launched <a href="https://www.apartments.com.au/new-apartments/arcilla-new-farm-by-joe-adsett-28-maxwell-street-new-farm-qld-4005">Arcilla on Maxwell Street</a>, an exclusive collection of just nine apartments.

First look: Seymour Group returns to New Farm's Oxlade Drive with riverfront apartment plans

A new residential tower will be the first piece of a broader mixed-use precinct set to reshape a prominent Newcastle West site, with local developer <a href="https://www.apartments.com.au/developers/gwh">GWH</a> bringing its <a href="https://www.apartments.com.au/new-apartments/cambridge-quarter-newcastle-west-12-denison-street-newcastle-west-nsw-2302">Cambridge Quarter</a> vision to market.

The first release, Tempo, will introduce 87 apartments across a 24-storey tower, marking Stage 1 of the residential component of a larger urban regeneration project planned for the western end of Newcastle's city centre, encompassing the former Cambridge Hotel site.

Positioned on Denison Street, Tempo has been designed as the inaugural building within Cambridge Quarter, a precinct that will ultimately combine apartments, retail activation and revitalised public spaces including the revamping of the Cambridge Hotel.

[smartcode_project:default project_id=135876 project_image_fid=368853]

The tower will comprise a mix of one, two and three-bedroom apartments, including layouts with multipurpose rooms, catering to a broad cross-section of owner-occupiers. Apartment sizes range from around 60 sqm to 192 sqm, with a number of residences oriented to capture views across Newcastle Harbour, the city skyline and coastline.

GWH has emphasised liveability in the design, with open-plan layouts extending to generous balconies and terraces. Residents will have a choice of two interior palettes, while specifications include engineered stone benchtops, SMEG appliances, full-height bathroom tiling and secure building access. Premium upgrade packages will also be available.

Multiple rooftop resident retreats will provide communal outdoor space overlooking the harbour and city, offering an elevated amenity layer above the activity of the precinct below.

[smartcode_project:default project_id=135876 project_image_fid=368851]

The broader Cambridge Quarter vision extends beyond the residential tower itself. Ground-level retail activation and landscaped public areas are planned throughout the precinct, creating a walkable neighbourhood environment connected to the surrounding renewal of Newcastle West. The Cambridge Hotel is also earmarked for future redevelopment into a family-friendly hospitality venue integrated with the new precinct.

The project is strategically positioned within walking distance of Newcastle Interchange, providing access to light rail, regional rail services and direct connections to Sydney. Residents will also be close to Honeysuckle, Newcastle Harbour and the city's beaches and coastal walkways.

[smartcode_project:default project_id=135876 project_image_fid=368852]

For GWH, Cambridge Quarter represents one of its most significant Newcastle developments to date. The locally based developer, which has operated in the Hunter region since 1995, describes the project as a new chapter in the ongoing transformation of Newcastle West.

GWH Executive Director Jonathan Craig said the project had been shaped by a focus on creating lasting community connections.

"We take pride in creating places that last. Spaces where people feel connected, comfortable and a genuine sense of belonging," Craig said.

"Cambridge Quarter is something we are truly proud of, a place shaped by local knowledge, built with care and designed to be part of Newcastle's next chapter."

[smartcode_project_cta:default project_id=135876]

GWH unveils first release at landmark Cambridge Quarter precinct in Newcastle West

<a href="https://www.apartments.com.au/developers/ss-projects">S&amp;S Projects</a>,&nbsp;Rainbow Bay's busiest developer,&nbsp;has officially lodged plans for the largest development in its booming local portfolio, seeking approval for a further 88 apartments on Boundary Street.

The proposal&nbsp;at <a href="https://www.apartments.com.au/new-apartments/209-213-boundary-street-coolangatta-qld-4225">209–213 Boundary Street, Coolangatta</a>,&nbsp;marks the next chapter in the developer's transformation of the southern Gold Coast beachside precinct. It will be its fifth in the area, having already delivered Flow, Awaken and Esprit, while construction continues on the 38-apartment Radia. The new project would rise 57 metres above a consolidated 1,518 sqm site, on the same street as Radia and Esprit.

&nbsp;

Designed by <a href="https://www.apartments.com.au/architects/cottee-parker-architects">Cottee Parker</a>, the proposed development comprises 88 two and three-bedroom apartments across a contemporary podium-and-tower form that integrates extensive landscaping from street level through to the rooftop.

The tower would be delivered above a basement and multi-level podium accommodating resident and visitor parking, with the residential component commencing from level three. The design incorporates cascading planting throughout the façade, landscaped podium edges, and deep planting zones along the Boundary Street frontage.

<img alt="First look: S&amp;S Projects lodges plans for 88-apartment wellness tower at Coolangatta's Boundary Street" data-entity-type="file" data-entity-uuid="677e6615-b5c0-4b6c-b4f9-efb14fcde1a6" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/ss%20da%20pers.png?VersionId=YOnPKQm7IFXv0M5H326djEpxk80500Hi" />

A key feature of the development is its expansive rooftop wellness and recreation precinct. Plans reveal a resort-style pool deck, gymnasium, sauna, steam room, hot and cold plunge pools, rooftop terraces, barbecue areas and landscaped relaxation spaces positioned to capture views across the southern Gold Coast coastline.

The rooftop wellness focus builds on the vision S&amp;S Projects first outlined when it acquired the site for $20.25 million last year.

"We are taking every advantage to create a truly unique rooftop wellness experience with a natural feel for residents, offering stone features throughout and an underlying theme that emulates a botanical garden," S&amp;S Projects founder and director Paul Gedoun said at the time.

The proposal seeks a 57-metre building height, representing a 50 per cent uplift on the site's mapped 38-metre height limit. Planning documents argue the additional height is consistent with recently approved and emerging towers in the immediate Boundary Street and Rainbow Bay precinct.

Urbis, acting as planning consultant, said the development would provide "88 dwellings, comprising a mix of two and three-bedroom apartments, contributing to housing choice and supply within an established medium to high-rise coastal urban neighbourhood."

The scheme has undergone extensive pre-lodgement consultation with the City of Gold Coast, with the design refined following feedback relating to architectural expression, landscaping, traffic access and podium treatment.

<img alt="S&amp;S" data-entity-type="file" data-entity-uuid="0a2d70fd-62ac-4b83-97c6-b798fc1243dd" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-05%20at%209.16.31%E2%80%AFAM.png?VersionId=yHmghUwKM3IVGpBktQU1mE.0Lpf3WimG" />

The architectural team is led by Brisbane-based Cottee Parker, one of Australia's most active residential design studios, with landscape architecture by Dunn + Moran. The consultant team also includes ADG Engineers, Windtech and Acoustic Works.

S&amp;S Projects has become one of the most influential private developers operating on the southern Gold Coast. Since entering Rainbow Bay in 2022, the company has assembled a portfolio exceeding $1 billion in end value, establishing itself as a key player in the area's evolution into a premium apartment destination. Pezet Matheson will again handle the sales for S&amp;S.

Coolangatta is entering another wave of apartment development, following the delivery of several prominent residential projects in recent years.

John Kearney's Immerse Projects will launch&nbsp;<a href="https://www.apartments.com.au/new-apartments/kaiya-kirra-beach-5-haig-street-coolangatta-qld-4225">Kaiya on Haig Street</a>&nbsp;soon, meanwhile, Palm Beach-based Sherpa Property Group is preparing to bring its debut Coolangatta development, <a href="https://www.apartments.com.au/new-apartments/flourish-viver-87-griffith-street-coolangatta-qld-4225">Flourish Viveré</a>, to market later this year, subject to approvals.

First look: S&S Projects proposes 88-apartment wellness tower at Coolangatta's Boundary Street

Currency

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EXPERT OBSERVER
There’s no trading strategy that will deliver better returns than chance.
In 2013 I wrote a <a href="https://theconversation.com/gambling-on-the-dollar-time-to-reign-in-forex-trading-21150" target="_blank">piece on The Conversation</a> arguing that foreign exchange trading should be much more tightly regulated.
In particular, I said that retail (mum and dad) investors should only be allowed to trade foreign currencies in limited circumstances. Since then there has been little change. It is still shockingly easy for a retail investor with a very limited understanding of foreign currency to trade foreign exchange, as was demonstrated on ABC 7.30 on <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/7.30/the-risky-world-of-online-foreign-exchange/10922394" target="_blank">Wednesday</a> and <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/7.30/the-opaque-world-of-foreign-exchange-trading/10927348" target="_blank">Thursday</a> nights.
There is a basic difference between foreign exchange trading and other forms of investment such as share trading. Over time, share markets tend to rise, so that if an investor buys a diversified basket of shares, or even an individual share, they should expect a positive return over time. Of course markets go up and down, and individual share trades can go wrong, but in the long run the market tends to rise.
<h2>Share trading it isn’t</h2>
Foreign currency markets are fundamentally different, in that there is no reason to expect exchange rates such as the Australian-US dollar rate to rise or fall over any short- or medium-term trading horizon.
For 30 or more years, academics have tried to build models to predict exchange rates. None of them work. If even the most sophisticated academic or trader built a model to predict whether the AUD/USD would go up or down tomorrow, they would get it wrong 50% of the time – exactly the same as a coin toss. This means trading foreign exchange on the basis of whether major currencies will go up or down is exactly the same as playing <a href="https://en.wikipedia.org/wiki/Two-up" target="_blank">two-up</a>!
<h2>Losses can exceed what you put in</h2>
The second reason that retail investors should be wary of foreign exchange trading is that many promoted products are highly leveraged - funded by borrowing. The Australian Securities and Investments Commission has <a href="https://www.moneysmart.gov.au/investing/complex-investments/foreign-exchange-trading" target="_blank">clear warnings about foreign exchange trading</a> on its Moneysmart webpage, including a case study of a typical trader who invests A$500 to borrow to buy A$100,000 at an exchange rate of 91 US cents.
With this contract, a fall in the USD/AUD exchange rate to 88.5 US cents sees this trader lose A$2,825, meaning they have to pay another A$2,325 in addition to the original A$500 to close out the contract.
<hr>
<a href="https://images.theconversation.com/files/265003/original/file-20190321-93057-1krimjl.JPG?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/265003/original/file-20190321-93057-1krimjl.JPG?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a> How to lose a lot from a little. <a class="source" href="https://www.moneysmart.gov.au/investing/complex-investments/foreign-exchange-trading" target="_blank">ASIC MoneySmart</a>
<hr>
If foreign exchange trading is so risky, and in my view no different to playing two-up or roulette, why do we allow retail investors to leverage into these products?
The problem, as I see it, is that regulators can take one of two approaches to investors. The traditional view is that if investors have enough information they will make informed choices in their own best interests. Economists describe this as behaving rationally. The ASIC approach is very much based on this view: provide good information and let investors make informed choices.
<h2>Information isn’t enough</h2>
There is a second view that is gradually replacing this view of individuals as rational. The “behavioural economics” approach examines the psychology and actual approaches of individuals in different circumstances, to explore departures from rationality. Unsurprisingly, in many arenas people are irrational, creatures of habit, ill-informed, and so on.
An implication is that sometimes people ought to be protected from their own poor decisions, even though that might limit choice. I would argue strongly that there is no reason for retail investors to trade foreign exchange, and certainly no reason to borrow to do it. Measures to limit such trading, except in circumstances where an investor can demonstrate their expertise, ought to be encouraged.
<h2>We’re a magnet for promoters</h2>
This is very far from the case in Australia currently. In fact Australia is seen as an attractive location for firms offering retail foreign exchange trading. Websites offer “training and tips” and then allow trading inside 24 hours.
I have spent 30 years studying foreign exchange markets and would still say that I’m not sophisticated enough to trade them. Maybe I’m dumb, but I’m not crazy enough to trade foreign exchange.
<a href="https://theconversation.com/profiles/mark-crosby-444" target="_blank">Mark Crosby</a>, Professor, <a href="http://theconversation.com/institutions/monash-university-1065" target="_blank">Monash University</a>
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/no-better-than-roulette-how-foreign-exchange-trading-rips-off-mum-and-dad-investors-113743" target="_blank">original article</a>.
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j.ballantyne1990-6AQqhLzZaK

No better than roulette. How foreign exchange trading rips off mum and dad investors

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GUEST OBSERVER
Some initial coin offerings seem like scams (and some are), but behavioural research shows our emotions are part of why people buy in to cryptocurrencies for fruits and vegetables or crypto trading even if cool-headed rationality screams at us not to.
An initial coin offering is just like an initial public offering. But, instead of shares, what’s being sold are cryptocurrency “coins” or “tokens”. These are similar to virtual currencies found in computer games, enabling you to buy goods or services within an ecosystem.
Around half of the initial coin offerings launched last year have already disappeared or failed. This has potentially cost investors hundreds of millions of dollars.
The boom in initial coin offerings is a textbook example of how our emotions drive us to be overly optimistic and to become fixated on the spectacular gains made by others. Companies and designers can also appeal to our emotions and our conceptions of ourselves by appearing to adopt moral positions.
This mix of emotions lets “irrational exuberance” over getting rich quick (while doing the world a favour) overwhelm our reason and willpower.
Early investors in initial coin offerings made an absolute killing, which led to a lot of media coverage of newly minted “crypto-billionaires”.
This is a recipe for creating what’s called “optimism bias” because people become fixated on the spectacular gains made by others, playing into a lust for wealth.
Comparing our meagre incomes to these huge profits also means, deep down, we become terribly afraid of losing our chance at riches, stimulating feelings of stress and what’s known as “loss aversion”.
<img src="https://images.theconversation.com/files/208214/original/file-20180228-36671-19yn96t.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="">
A bananacoin is pegged to the export price of one kilogram of bananas.
But even more striking in the boom of initial coin offerings is how many appear to be about some moral initiative, such as supporting sustainable energy, artists, veganism or organic bananas.
In other words, many initial coin offerings tap into a set of emotional impulses associated with morality.
Research in social psychology shows that morals are built on powerful emotions, not reasoning. Signals from our environment go through emotional centres of the brain not only before the reasoning centres, but even before our sensory centres – we “feel” even before we “see”.
Reasoning serves merely to justify emotional reactions. People will justify what they already want to do, or have done, after the fact.
We also know from other research that while reason does give us willpower to resist emotional temptation, it has only a finite capacity to do so and can be overwhelmed.
The moral aspect of initial coin offerings also taps into our conceptions of our own identities. My research shows that if I can find a way that my cryptocurrency (say a cryptocurrency for veganism) would allow you to live out your moral identity (being a vegan) then it’s much easier for me to get the idea into your mind that you should buy it.
Once such ideas are implanted into the mind, they are difficult to restrain.
When we lust for riches, fear being left behind and identify strongly with some moral cause all at once, reason and willpower don’t really stand a chance.
But simply regulating initial coin offerings is difficult. One of the first things you learn in economics is the “law of unintended consequences” – that regulation seldom does only what it was intended to do.
Regulations aimed at protecting individuals from themselves could restrict new technologies and discourage a necessary process – discovering what’s a stupid idea and what is a spectacularly good idea. The line between them is very fine indeed and almost never obvious.
<img src="https://counter.theconversation.com/content/92508/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">Among all the crackpots and charlatans we might just discover a technology to educate girls in Africa, fund a breakthrough in clean energy technology, or help to stamp out human rights abuses across the world.
Brendan Markey-Towler, The University of Queensland.
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/why-we-put-money-into-bizarre-cryptocurrencies-like-ponzicoin-and-cryptokitties-92508" target="_blank">original article</a>.
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Why we put money into bizarre cryptocurrencies like ponzicoin and cryptokitties

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GUEST OBSERVER
The current international tax regime was developed in the last century when the internet was not yet invented.
At that time, a foreign company would typically require a substantial physical presence in Australia before it could be in a position to earn significant amount of income from Australian customers. This is what’s known in the tax world as permanent establishment.
The concept of permanent establishment is embedded in most domestic tax laws as well as virtually all the 3,000 plus tax treaties in the world. It dictates that in general, business profits of a foreign company will be subject to tax in Australia only if the company has a permanent establishment in Australia. In other words, the ATO cannot tax a foreign company’s profits if it has no permanent establishment in Australia.
The recent hearings of the Senate inquiry into corporate tax avoidance made it clear the tax structures of Uber, Airbnb, like their older peers Google and Microsoft, are designed to ensure income from Australian customers is earned by a foreign company that does not have a permanent establishment here. The permanent establishment concept is not effective for today’s digital economy.
<h2>Uber’s business and tax structure</h2>
Take Uber, which though established in the US, has a wholly-owned subsidiary in the Netherlands, which in turn has a wholly-owned subsidiary in Australia.
The most important asset of Uber is its digital platform that supports the app linking individual drivers and their customers. It’s unlikely this app was developed in the Netherlands. Despite this, Uber-Netherlands has the right to book income generated from customers in Australia.
For example, if a customer pays $100 for a ride in Sydney booked through the Uber app, the money is in fact paid to Uber-Netherlands. Out of the $100, Uber pays the driver about $75. The gross profit of $25 is booked in the Netherlands. This is so even though the transaction happens largely in Australia, including the driver, the customer and the ride.
Uber-Australia receives a service fee from Uber-Netherlands for its marketing and support services performed in Australia. The fee is determined based on the operating costs of Uber-Australia, plus a mark-up of 8.5%. The mark-up is effectively the taxable profit of Uber in Australia under its tax structure.
<h2>Airbnb’s business and tax structure</h2>
Airbnb, another young business founded in the US, has a structure very similar to that of Uber. Airbnb’s parent company in the US has a wholly-owned subsidiary in Ireland, which in turn has a wholly owned subsidiary in Australia.
Airbnb charges fees to both hosts and guests for accommodation booking through its digital platform. Instead of Airbnb-Australia, Airbnb-Ireland books the fee income generated from accommodation bookings in Australia. This is so even if the host, the guest and the accommodation are all in Australia. For example, if a Sydneysider uses the Airbnb app to book accommodation in Melbourne, the payment is in fact paid to Airbnb-Ireland. The host of the accommodation is then paid by Airbnb-Ireland which charges a fee of 3%.
Airbnb-Australia is responsible for the marketing activities in Australia. It receives a service fee from Airbnb-Ireland for those activities, and the fee is again computed based on its operating costs plus a mark-up.
<h2>Déjà vu – Google and Microsoft</h2>
Comparing the tax structures of Uber and Airbnb with that of Google and Microsoft reveals striking similarities. It suggests that the appetite for tax planning is comparable between established and relatively “young” technology companies.
The common pattern: a parent company in the US establishes wholly owned subsidiaries in market jurisdictions (such as Australia) as well as in low-tax countries.
While the commercial reality is that all companies in a group are effectively one single enterprise, the tax law in general treats each company as a separate taxpayer.
On one hand, the Australian subsidiary typically is responsible for marketing and support services that have to be physically done in Australia, and earns a service fee on a cost plus basis. The amount of profits subject to tax in Australia is usually very small compared to the income generated from Australian customers.
On the other hand, intellectual properties – which are often the most important and valuable assets of technology companies – are located in low-tax jurisdictions such as Ireland, the Netherlands and Singapore. This structure allows those low-tax subsidiaries to book the income generated from customers in Australia, and effectively shields the income from the Australian tax net.
<h2>Policy responses</h2>
Action item 1 of the OECD’s base erosion and profit shifting (“BEPS”) project is “tax challenges of digital economy”.
The original intention of the OECD was to explore how the 20th century international tax regime should be reformed in response to the digital economy in the 21st century. It quickly realised it was extremely difficult, if not impossible, to achieve international consensus on the intended reform. The often conflicting and vested interests among countries present a formidable obstacle to international consensus on meaningful reform of the international tax regime.
Instead of relying on the BEPS project to resolve the issue, Australia has followed the lead of the UK and is in the process of introducing the Multinational Anti-Avoidance Law – commonly known as the Google tax– to address the issue. As the new law incorporates concepts that are new and untested, it is not clear whether it will be effective.
In any case, it’s important to remember that multinational corporations are very agile. They may replace their “avoided permanent establishment” structures to circumvent any Google tax or to incorporate new tax avoidance tools.
 
Antony Ting is associate professor, University of Sydney and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/antony-ting-117958" target="_blank">here</a>.
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