US Abandons 'Revenge Tax', Easing Burden on Australian Super Funds

In a significant development for Australian investors, the United States has decided to eliminate a proposed 15 percent tax, often referred to as a 'revenge tax,' targeting countries that impose taxes on U.S. technology giants. This announcement was made by U.S. Treasury Secretary Scott Bessent and welcomed by Australian Treasurer Jim Chalmers, who had previously lobbied for the tax's removal.

The decision, revealed on June 27, 2025, alleviates concerns that Australian superannuation funds would face detrimental financial impacts from retaliatory tax measures stemming from U.S. legislation associated with former President Donald Trump’s 'big, beautiful bill.' Chalmers described the news as a 'really welcome one for Australians,' emphasizing the importance of fair treatment for Australian investors in the U.S. market.

The proposed tax, which targeted countries with perceived discriminatory tax policies, particularly aimed at Australia’s recent initiatives to tax digital service platforms that do not compensate for news content. U.S. Trade Representative Jamieson Greer had previously expressed concerns about this Australian tax during discussions with Prime Minister Anthony Albanese at a G7 meeting.

Despite the withdrawal of the 'revenge tax,' the U.S. administration remains vigilant against foreign taxes that it views as discriminatory. Secretary Bessent indicated that while the tax will not be imposed, the U.S. will continue to protect its tax sovereignty against laws it deems unfavorable.

Initially, the Trump administration's proposal was a response to grievances primarily with European countries. However, the legislation threatened to ensnare Australian investors due to their involvement in the U.S. market. The tax could have imposed significant financial burdens on Australian super funds, which manage billions in investments.

In exchange for dropping the retaliatory tax, Bessent noted that the U.S. had secured an exemption for its own multinational tax regulations, which involve a minimum tax regime for U.S. investments in foreign companies, known as the Global Intangible Low-Taxed Income (GILTI) tax, set between 10.5 percent and 13.125 percent.

Chalmers stated that Australia would 'consider the implications' of these developments but would continue to advocate for international tax rules that ensure multinationals contribute their fair share in Australia. The ongoing discussions reflect a broader context of international tax reform, especially with the global agreement known as Pillar Two, which seeks to establish a worldwide minimum tax for multinationals.

Rachel Reeves, Chancellor of the Exchequer for the UK, acknowledged the importance of the G7 agreement in ensuring a level playing field for taxation. This sentiment was echoed by Chalmers, who expressed a commitment to constructive engagement on international tax matters.

Looking ahead, the future of U.S.-Australia economic relations may hinge on how both countries navigate their tax policies and the geopolitical landscape, especially as the U.S. continues to assert its influence on global tax standards. Observers will be keen to see if this tax reprieve leads to more favorable conditions for Australian investors or if new challenges will emerge in the U.S.'s approach to international tax affairs.