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Multilateral Instrument

How the multilateral instrument modifies tax treaties to address multinational tax avoidance and resolve tax disputes.

Last updated 21 April 2024

Overview of the MLI

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, also known as the Multilateral Instrument (MLI), is a multilateral treaty that enables jurisdictions to swiftly modify the operation of their tax treaties to implement measures designed to better address multinational tax avoidance and more effectively resolve tax disputes.

These measures were developed as part of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project.

Australia signed the MLI on 7 June 2017. The MLI was given the force of law in Australia by the Treasury Laws Amendment (OECD Multilateral Instrument) Act 2018, which received Royal Assent on 24 August 2018.

Australia deposited its instrument of ratification with the OECD Depositary on 26 September 2018.

The MLI entered into force for Australia on 1 January 2019. The extent to which the MLI will modify the operation of Australia’s tax treaties will depend on the adoption positions taken by each jurisdiction at ratification, acceptance or approval of the MLI.

Australia’s notification of its adoption positions at ratification (PDF 1.44 MB)This link will download a file is available on the OECD website.

When the MLI takes effect in Australia

The date of entry into effect for Australia for each of Australia’s tax treaties modified by the MLI depends on the actions of the treaty partner jurisdiction, specifically when the MLI has been ratified, accepted or approved for the treaty partner's domestic purposes and when the relevant notifications have been lodged with the OECD.

Subject to these processes, the earliest the MLI takes effect in Australia is as follows:

  • for withholding taxes, on income derived on or after 1 January 2019
  • for all other taxes, for income years starting on or after 1 July 2019
  • for dispute resolution, generally on or after 1 January 2019.

How the MLI works

Jurisdictions that sign the MLI are required to identify which of their tax treaties they want the MLI to apply to and modify. The tax treaties which are covered by the MLI are called 'Covered Tax Agreements' (CTAs).

Both treaty partners need to identify their tax treaty as a CTA in order for that treaty's operation to be modified by the MLI. In the event that only one jurisdiction (or neither jurisdiction) identifies a tax treaty as a CTA, the provisions of that treaty will remain un-modified.

The MLI incorporates flexibility that allows jurisdictions to tailor their adoption to fit their particular national circumstances and accommodate unique aspects of their treaty network.

Each jurisdiction is required to notify the OECD Secretariat of its set of provisional choices (referred to as that jurisdiction's 'MLI position') at the time of signature (of the MLI), and confirm them at the time of ratification. Jurisdictions' MLI positions are available on the OECD website (PDF 73KB)This link will download a file.

While some MLI articles are mandatory (minimum standards), most are optional. Jurisdictions can choose to adopt the minimum standards only, or they can choose to also adopt some, or all, of the optional articles. If there is a bilateral match, the MLI will modify, but not directly amend, nominated tax treaty clauses. Other unrelated parts of the treaties will remain unchanged.

Tax treaties and the impact of the MLI

Based on other jurisdictions’ known adoption positions the MLI is expected to modify the operation of, to varying degrees, many of Australia’s tax treaties as indicated in the table below.

The number of treaties modified by the MLI could change if more of Australia’s tax treaty partners sign and ratify the MLI and nominate their treaty with Australia.

The extent to which the MLI will modify these treaties will depend on the adoption positions taken by each jurisdiction at ratification, acceptance or approval of the MLI.

We are preparing a synthesised text for the majority of Australia's tax treaties modified by the MLI. When we have published a synthesised text it can be accessed from the table below.

Treaties not modified by the MLI

Based on current MLI positions or jurisdictions that have not signed the MLI, treaties not modified by the MLI include:

  • Austria
  • Germany
  • Iceland
  • Israel
  • Kiribati
  • Philippines
  • Sri Lanka
  • Sweden
  • Switzerland
  • Taiwan
  • United States

Treaties modified by the MLI

The table below lists the treaties the operations of which will be modified by the MLI. Treaties for which the date of effect of the MLI provisions are not yet known are those in respect of which the treaty partner has yet to action its ratification, acceptance or approval of the MLI and notify the OECD. You can click through to the synthesised text for each treaty partner in the table below, as they become available.

Australia's CTAs will enter into effect for Australia for withholding taxes and for other taxes as set out below

Treaty partner

Entry into effect for withholding tax on income derived on or after

Entry into effect for other taxes for income years starting on or after
















Czech Republic













































The Netherlands



New Zealand






Papua New Guinea















The Slovak Republic



South Africa












United Kingdom






Note: Subparagraph a) of paragraph 1 of Article 9 of the MLI has effect with respect to the application of the Agreement between Australia and Finland for taxes levied with respect to taxable periods beginning on or after 1 January 2024.

Main features of the MLI and Australia's adoption positions at ratification

The main features of the MLI and Australia’s adoption positions at ratification of the MLI – as published on the Treasury websiteExternal Link – are set out below. The extent to which the MLI will modify the operation of Australia’s tax treaties will depend on the adoption positions taken by other jurisdictions at ratification, acceptance or approval.

In this section  

Article 3 – Transparent entities (optional article)

Treaty benefits will be granted for income derived through fiscally transparent entities, such as partnerships or trusts, but only if one of the 2 jurisdictions treats the income as income of one of its residents under its domestic law.

These rules will not prevent either jurisdiction from taxing its own residents.

Australia has adopted Article 3 but will preserve existing corresponding bilateral detailed rules.

Article 4 – Dual resident entities (optional article)

Most treaties use an entity’s place of effective management as the key tiebreaker test to determine a dual resident’s jurisdiction of tax residence for treaty purposes.

This test will be expanded to include other factors and authorise the 2 tax administrations to agree on a single jurisdiction of residence.

Australia has adopted Article 4 but not the rule that would allow the 2 tax administrations to grant treaty benefits in the absence of such an agreement.

For more information, see applying for a Competent Authority determination.

Article 5 – Application of methods for elimination of double taxation (optional article)

Three options available under this Article will ensure that jurisdictions relieve double taxation by crediting foreign tax against domestic tax rather than by exempting foreign income from domestic tax.

Australia has not adopted:

  • Article 5 because all of its treaties apply the credit method in relieving double taxation for Australian residents
  • the provisions that would prevent other jurisdictions from applying their chosen positions under Article 5.

Article 6 – Purpose of a covered tax agreement (mandatory article)

New treaty preamble text will clarify that tax treaties are not intended to create opportunities for non-taxation or reduced taxation through tax evasion or avoidance, including through treaty-shopping arrangements.

Australia has adopted Article 6, including the optional text indicating a desire to further develop its economic relationships with other signatories and enhance cooperation in tax matters.

Article 7 – Prevention of treaty abuse (mandatory article)

New anti-abuse rules will enable tax administrations to deny treaty benefits in certain circumstances; the Principal Purposes Test (PPT) and the Simplified Limitation on Benefits Rule (S-LOB). The PPT is the default option which enables jurisdictions to satisfy the BEPS minimum standard. The S-LOB is a supplementary and optional rule.

Australia has adopted the PPT in Article 7, including the discretion not to apply the PPT in certain circumstances. Australia has not adopted the S-LOB.

For more information on the principal purposes test, see:

  • Practice Statement Law Administration PS LA 2020/2 Administering general anti-abuse rules, such as a principal or main purposes test, included in any of Australia's tax treaties.

Article 8 – Dividend transfer transactions (optional article)

Shares will be required to be held for 365 days before dividends payable in respect of those shares become eligible for reduced tax rates applicable to non-portfolio intercorporate dividends under tax treaties.

This Straddle holding period will be added to nominated treaties that do not already include a minimum holding period and replace existing holding periods in treaties that do.

Australia has adopted Article 8 without reservation.

Article 9 – Capital gains from alienation of shares or interests of entities deriving their value principally from immovable property (optional article)

Jurisdictions will be able to tax capital gains derived by foreign residents from the disposal of shares or other interests in ‘land-rich’ entities (where the underlying property is located in that jurisdiction) if the entity was land-rich at any time during the 365 days preceding the disposal.

Australia has adopted Article 9 but will preserve existing bilateral rules that apply to the disposal of comparable interests (non-share interests) in land-rich entities.

Article 10 – Anti-abuse rule for permanent establishments situated in third jurisdictions (optional article)

Treaty benefits will be denied where an entity that is a resident of one jurisdiction derives ‘passive’ income from the other jurisdiction through a permanent establishment located in a third jurisdiction, and that income is both exempt in the entity’s home jurisdiction and subject to reduced taxation in the third jurisdiction.

Australia has not adopted Article 10.

Article 11 – Application of tax agreements to restrict a Party’s right to tax its own residents (optional article)

A tax treaty will not generally restrict a jurisdiction’s right to tax its own residents. This rule will replace existing bilateral rules that give effect to this principle, some of which have more limited application.

Australia has adopted Article 11 without reservation.

Article 12 – Artificial avoidance of permanent establishment status through commissionaire arrangements and similar strategies (optional article)

Where an intermediary plays the principal role in concluding substantively finalised business contracts in a jurisdiction on behalf of a foreign enterprise, that arrangement will constitute a ‘permanent establishment’ of the foreign enterprise in that jurisdiction. Genuine independent agency arrangements will not be affected.

Australia has not adopted Article 12. Australia will consider adopting these rules bilaterally, however, in future treaty negotiations to enable bilateral clarification of their application in practice.

Pending this, the Multinational Anti-Avoidance Law will continue to safeguard Australian revenue from egregious tax avoidance arrangements that rely on a ‘book offshore’ model.

Article 13 – Artificial avoidance of permanent establishment status through the specific activity exemptions (optional article)

Most tax treaties include a list of exceptions to the definition of permanent establishment if a place of business is used solely for specifically listed activities such as warehousing or purchasing goods.

Only genuine preparatory or auxiliary activities will be excluded from the definition of permanent establishment. In addition, related entities will be prevented from fragmenting their activities to qualify for this exclusion.

Australia has adopted Article 13 but will preserve existing corresponding bilateral rules.

Article 14 – Splitting-up of contracts (optional article)

Most tax treaties include rules that deem building or construction projects that exceed a specified time period (for example 12 months) to constitute a permanent establishment.

Related entities will be prevented from avoiding the application of the specified time period by splitting building or construction-related contracts into several parts.

Australia has adopted Article 14 but will preserve existing bilateral rules that deem a permanent establishment to exist for offshore natural resource activities.

Article 15 – Definition of a person closely related to an enterprise (optional article)

A ‘person closely related to an enterprise’ will be defined for the purpose of establishing whether or not a permanent establishment exists under Articles 12, 13 and 14.

Australia has adopted Article 15 without reservation.

Article 16 – Mutual agreement procedure (mandatory article)

New rules will ensure the consistent and proper implementation of tax treaties, including the resolution of disputes regarding their interpretation or application. This will provide taxpayers with a more effective tax treaty-based dispute resolution procedure.

Australia has adopted Article 16 without reservation.

Article 17 – Corresponding adjustments (mandatory article)

Transfer pricing adjustments can result in double taxation when one jurisdiction makes an adjustment to an entity’s profits and the other jurisdiction does not make a compensating adjustment to the profits of the relevant related entity.

A jurisdiction will be required to make a downward adjustment to the profits of a resident entity, as a result of an upward adjustment by the other jurisdiction to the profits of an associated entity which is a resident of that other jurisdiction (provided both jurisdictions agree that the upward adjustment is justified).

Australia has adopted Article 17 but will preserve existing corresponding bilateral rules.

Articles 18–26 – Arbitration (optional article)

Taxpayers will be able to refer mutual agreement procedure disputes that remain unresolved to independent and binding arbitration if they satisfy various criteria.

Australia will adopt independent and binding arbitration subject to all the following conditions:

  • disputes which have been the subject of a decision by a court or administrative tribunal will not be eligible for arbitration, or will cause an existing arbitration process to terminate
  • breaches of confidentiality by taxpayers or their advisers will terminate the arbitration process
  • disputes involving the application of either of the following will be excluded from the scope of arbitration                      
    • Part IVA of the Income Tax Assessment Act 1936
    • section 67 of the Fringe Benefits Tax Assessment Act 1986.

Supporting material

To help stakeholders understand the effect of the MLI on Australia’s tax treaties, we are producing supporting materials and guidance.

Synthesised texts

We are preparing synthesised texts for the majority of Australia's tax treaties modified by the MLI. You can find synthesised texts that are currently available in the table above. A synthesised text helps users of the MLI understand how the MLI modifies the operation of the particular tax treaty.

A synthesised text presents the following in a single document:

  • the text of the tax treaty which is modified by the MLI, including the text of amending instruments such as protocols
  • the provisions of the MLI that have an effect on the tax treaty as a result of the interaction of the MLI positions of the jurisdictions
  • the dates on which the provisions of the MLI take effect for the tax treaty.

The sole purpose of a synthesised text is for facilitating the understanding of the application of the MLI to a particular tax treaty. A synthesised text does not constitute a source of law. The authentic legal texts of the tax treaty and the MLI take precedence and remain the legal texts applicable.

Mandatory binding arbitration

The MLI will modify many of Australia's tax treaties to provide for mandatory binding arbitration. The date of effect and the availability of mandatory binding arbitration will vary between each tax treaty. Further information on eligibility, process, availability and timing for requesting arbitration is now available.

Dual resident entities (non-individual)

Guidance on competent authority determinations for non-individuals under Article 4(1) of the MLI is available. For information regarding the administrative approach for competent authority determinations for Australia or New Zealand companies, see MLI Article 4(1) Australia and New Zealand administrative approach.

Prevention of treaty abuse (principal purposes test)

We have released Practice Statement Law Administration PS LA 2020/2 Administering general anti-abuse rules, such as a principal or main purposes test, included in any of Australia's tax treaties.

PS LA 2020/2 outlines instructions to ATO staff on the administrative process of applying the general anti-abuse rules in Australia's tax treaties to ensure consistent administration.

PS LA 2020/2 covers the administration of the following general anti-abuse rules in Australia's tax treaties:

  • the principal purposes test (PPT) under Article 7 of the MLI
  • a PPT in an Australian tax treaty that is not impacted by the MLI
  • a main purposes test in an Australian tax treaty that is yet to be or will not be modified by the MLI.

MLI information

More information on the MLI can be found by visiting the following resources: