Australian entities operating in the US could be subject to higher taxes under Trump’s ‘Big Beautiful Bill’ economic reform package, Pitcher Partners has warned.

In May, the US House of Representatives passed the “One Big Beautiful Bill,” a domestic tax and spending package which could have international implications.

If passed in the Senate, the bill could impose higher tax rates on Australian taxpayers who earn US-sourced income, Pitcher Partners has said.

“The Bill introduces retaliatory tax increases on specific income categories, with direct implications for Australian taxpayers earning US sourced income,” Pitcher Partners wrote.

“If enacted in its current form, its international tax provisions may have significant implications for Australian taxpayers with business interests or investments in the US.”

Affected taxes include the 21 per cent US corporate tax rate, the 5 to 30 per cent withholding tax on passive income, 5 to 30 per cent branch profits tax on repatriated income from US branches of foreign entities, and 15 to 21 per cent gains taxes on the disposal of US real property.

The bill could see these rates climb by 5 per cent each year, until they reach a pre-determined cap. Under the House version of the bill, the maximum tax increase would be 20 per cent, while the Senate bill has proposed a cap of 15 per cent.

Jenny Wong, tax lead for CPA Australia, previously told Accounting Times that the Trump administration had expressed intentions to investigate “extraterritorial” taxes that impact US multinationals.

“Trade and tax policy is being linked together, and it is really a signal from the US to the rest of the world that it's going to investigate extraterritorial taxes, which sets the stage for potential global trade disputes,” Wong said.

She predicted that part of this retaliation could include higher US tax rates on Australian expats living in the US and Australian businesses operating in the US.

The ‘Big Beautiful Bill’ flagged that “discriminatory foreign countries” would be targeted with retaliatory tax hikes. It has already identified the ‘digital services tax,’ ‘undertaxed profits rule’ and ‘diverted profits tax’ rules as unfair tax policies that warrant retaliation, Pitcher Partners said.

Pitcher Partners warned that Australia's adoption of OECD global minimum tax rules and multi-national anti-avoidance tax provisions could be targeted under this criteria.

It added that other Australian policies, such as its News Bargaining Incentive and penalty regimes for ‘significant global entities’ that fail to adhere to Australian tax standards, could draw the ire of the US administration.

While the bill is not guaranteed to pass in its current form, Australian entities should still be mindful of it, Pitcher Partners warned.

“As matters stand today, the potential impact of this Bill is certainly something that Australian taxpayers with US interests should keep a close eye on.”