House of Representatives

International Tax Agreements Amendment Bill 2016

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)

General outline and financial impact

German agreement

Schedule 1 to this Bill amends the International Tax Agreements Act 1953 (Agreements Act 1953) to give the force of law in Australia to the Agreement between Australia and the Federal Republic of Germany for the Elimination of Double Taxation with respect to Taxes on Income and on Capital and the Prevention of Fiscal Evasion and Avoidance and its Protocol (the German agreement), which were signed at Berlin on 12 November 2015.

Date of effect: The German agreement must first enter into force. For entry into force, Australia and Germany must exchange instruments of ratification on the completion of the necessary implementing domestic procedures. Once the German agreement enters into force, it will take effect in Australia in three stages, namely:

in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after 1 January next following entry into force;
in respect of fringe benefits tax, in relation to fringe benefits provided on or after 1 April next following entry into force;
in respect of other Australian tax, in relation to income, profits or gains of any year of income beginning on or after 1 July next following entry into force.

Proposal announced: The Government announced negotiations to update the existing tax treaty between Australia and Germany in a joint Media Release by the then Treasurer and the Minister for Finance on 16 June 2015 ('Beginning tax treaty negotiations with Germany'). Signature of the German agreement was announced in a joint Media Release by the Treasurer and the Minister for Finance on 13 November 2015 ('New tax treaty signed with Germany').

Financial impact: The measure has the following revenue implications over the forward estimates:

2015-16 2016-17 2017-18 2018-19 2019-20
- -$15m -$35m -$35m -$40m

Human rights implications: This Bill engages and is compatible with human rights. See Statement of Compatibility with Human Rights - Chapter 2, paragraphs 2.1 to 2.28.

Compliance cost impact: The text of the German agreement is broadly consistent with international norms and no significant additional compliance costs are expected to result from its entry into force.

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