Australia announces expanded double tax treaty network

The Australian treasurer, Josh Frydenberg, announced on September 15 2021, a significant expansion of Australia’s double tax treaty network to stimulate economic integration through foreign investment and trade, among other things.

It is intended that Australia will enter into 10 new or updated double tax treaties by the end of 2023, the first phase of which will include a revised Indian–Australian treaty as well as new treaties with Luxembourg and Iceland.

Further revised or new treaties are proposed with Greece, Portugal and Slovenia.  According to the government’s media release, six of the 10 countries have been identified at this time with further analysis and consultation planned with a view to determining further treaty updates/renewals. 

In recent years, Australia has entered into two new treaties most importantly with Israel in 2020 and Germany in 2017.

The government has restated its commitment to modernise and expand Australia’s double tax treaty network and has committed critical resources and funding to support this expansion of Australia’s double tax treaty network.

Australia has 45 bilateral double tax treaties which will be significantly expanded by this recently announced initiative. The government has welcomed a public consultation along with a formal submission process with submissions due by October 31 2021.

Australia has been a strong supporter of the multilateral instrument which was largely operative for many of our existing double tax treaties from 2019–2020.

Although no decisions have been made at this stage various features associated with the OECD/G20 BEPS initiatives is expected including related to transparent entities, permanent establishments, concessional dividend, interest and royalty withholding taxes, limitation on treaty benefits, mutual agreement procedure, dispute resolution/arbitration and related initiatives. 

Australia was an early supporter of BEPS 1.0 including the related action plans, and has been actively involved in BEPS 2.0 including the proposed pillars one and two which are currently the subject of much global discussion and negotiation.

With the increasing integration and overlay of economic, foreign investment and security arrangements globally, this government initiative is very timely and well supported.

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