Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Josh Frydenberg MP)General outline and financial impact
The Australia-Israel Convention and deemed source rule
This Bill amends the Agreements Act to give force of law to the Convention between the Government of Australia and the Government of the State of Israel for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance (the Convention). This process is part of Australia's domestic procedure for implementing its tax treaties.
This Bill also introduces a domestic source of income rule to ensure that Australia can exercise its taxing rights under the Convention and future international tax agreements.
Date of effect: The amendments commence on the day after they receive the Royal Assent. However, the Convention itself must first enter into force before it can take effect. For entry into force, Australia and Israel must exchange instruments of ratification on the completion of their domestic implementation procedures.
Proposal announced: On 23 February 2017, Australia and Israel announced their commitment to conclude a tax treaty in a joint media statement (Joint Statement by Prime Ministers of Israel and Australia, Media Release of 23 February 2017 refers). On 28 March 2019, the Australian Government announced it has signed the Convention (New tax treaty signed with Israel, Media Release of 28 March 2019 refers).
Financial impact: The Bill is estimated to have an unquantifiable cost to revenue over the forward estimates.
Human rights implications: This Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 3.
Compliance cost impact: The Convention is consistent with international norms and no significant additional compliance costs are anticipated as result of its entry into force.