The hidden nasty for Australian investors in Trump’s ‘big, beautiful bill’

New York: A proposed new tax on foreigners buried in the “big, beautiful bill” championed by US President Donald Trump has alarmed the Australian business community in New York, with multinationals, super funds and high-net-worth individuals all liable to be hit.

Section 899 of Trump’s key taxation bill, which has passed the US House of Representatives and now heads to the Senate, would impose “increased rates of tax on foreign persons of discriminatory foreign countries”, starting at 5 per cent and increasing annually to as high as 20 per cent.

President Donald Trump arrives at Allegheny County Airport in Pennsylvania on Friday.Credit: AP

A number of Australian policies are considered unfair or discriminatory by the US government.

The tax threat has unnerved Wall Street and rattled figures in the US-Australian business community, as well as at the highest levels of the Australian consulate in New York.

American Australian Association president Steven Marshall said there was growing concern among Australian investors about the proposal, “particularly its implications for cross-border investment and taxation”.

But he noted the bill was not finalised. “The full details and potential impact remain unclear. We’ll have a better sense of the real consequences once the legislation progresses to the US Senate and more concrete provisions are released.”

President Donald Trump speaks to reporters in the rain after arriving at Joint Base Andrews in Maryland on Friday.Credit: AP

Michael Brown, a senior analyst at Melbourne-based broker Pepperstone, whose clients are largely Australian, said: “If it ends up passing through the Senate and becoming law, it’s going to be incredibly punitive to actually invest in the United States.”

Brown said his firm had been flooded with inquiries from Australian and European clients about the proposed law, which escaped initial headlines about the “big, beautiful bill” but has now become widely seen as a secret “sting in the tail” of the legislation.

While section 899 does not explicitly target Australia, the administration has already identified Australian laws and programs that it views as discriminatory, such as the diverted profits tax and news media bargaining code, which levies money for news organisations from major technology companies such as Google and Meta.

Digital-services taxes in place in numerous European countries are also in the Trump administration’s sights.

“The definition of unfair tax practices is an incredibly broad one,” Brown said. “The way it’s written gives a hell of a lot of wriggle room for the US Treasury to begin weaponising financial assets.”

A briefing note by global law firm McDermott Will & Emery says the proposal is intended to act as a negotiating tool to persuade foreign governments to withdraw or avoid adopting the taxes and measures the US government considers unfair or extraterritorial.

“However, if enacted as drafted without achieving the intended withdrawal of the targeted taxes, this rule could increase tax burdens on closely held companies, ultra-high-net-worth families, family offices, multinational corporations, and sovereign investors alike,” the analysis by Mohsen Ghazi and colleagues says.

If passed, the law could override tax provisions in existing treaties such as the free trade agreement between Australia and the US, although that may need to be tested in court.

Steven Hamilton, an assistant professor of economics at George Washington University, and a former Australian treasury staffer, said Australian governments tended to pursue “unprincipled cash grabs” with policies such as the news media bargaining code and diverted profits tax, without thinking about any unintended consequences.

“Now the Trump administration is holding a guillotine over the heads of Australian super funds, and by extension, millions of ordinary Australians,” he said.

“While I don’t think Australia should bow to every wish of the Trump administration, I do think we should consider carefully opportunities to improve Australian policy while checking a box for the administration.

“There were certainly alternative policy choices we could have made that would both have produced better outcomes for Australia and avoided raising Trump’s hackles.”

The Australian government is aware of the section 899 proposal and denied its taxation programs were unfair or extraterritorial.

“Australia’s tax settings are fair and consistent with tax and trade agreements,” an Albanese government spokesperson said.

“We are continuing to work constructively through the OECD and G20, and bilaterally with other countries, on fair and fit-for-purpose international tax rules.

“Our tax system is critical to funding the vital services Australians need and deserve.”

The Trump administration is also using tariffs to punish countries for what it views as unfair trade and taxation practices.

Get a note directly from our foreign correspondents on what’s making headlines around the world. Sign up for our weekly What in the World newsletter.