Income derived from goods and services provided in Australia are taxed in Australia.
1. Company tax is either (choice is made by the Company) paid on revenue (at a low rate, say 1%) or profit (at a higher rate, say 30%).
2. Deductions are only allowed for domestic goods or services.
1. Foreign companies will create domestic companies (“Domestic Shells”) to service other domestic companies so that those domestic companies can get a deduction (otherwise the domestic companies wouldn’t buy the good or service).
2. The Domestic Shells would pay tax on revenue because without a deduction (there is no deduction because they are sourcing the good or service from a foreign source) their profit would equal their revenue, and as such, they would pay less tax (1% compared to 30%).
3. Domestic Companies using domestic goods and services would still pay the normal tax on profits.
1. Individuals purchasing goods or services from foreign companies would not be captured. But, this is the case today - "If you are from a country that does not have a tax treaty with Australia, income from an Australian source is generally taxable in Australia"