House of Representatives

Explanatory Memorandum

(Circulated by authority of the Acting Treasurer, the Hon. Bill Hayden, M.P.)

Introductory Note

The main purpose of this Bill is to give the force of law in Australia to:

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a new comprehensive double taxation agreement between Australia and New Zealand that was signed in Melbourne on 8 November 1972 to replace the agreement concluded with New Zealand in 1960 (an outline of the new agreement is at pages 6 to 13 of this memorandum) - clause 4; and

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an agreement between Australia and Italy for the avoidance of double taxation of income derived from international air transport that was signed in Canberra on 13 April 1972 (an outline of the agreement is at pages 14 and 15 of this memorandum) - clause 5.

The Bill also specifies that interest and royalties derived by residents of Australia from New Zealand and in respect of which New Zealand tax is limited by the new agreement with New Zealand to 10 and 15 per cent respectively will not, by reason of the payment of that limited New Zealand tax, be exempt from Australian tax. (Australia will instead allow credit for the New Zealand tax against the Australian tax on this income.) The Bill further provides that provisions of the new agreement designed to overcome for the future cases of unrelieved double taxation of certain interest and royalty payments received from New Zealand by Australian residents will also apply to any such cases that have occurred since the 1968-69 income year, i.e., the year in which this double taxation was first effective.

Notes on the clauses of the Bill are given below and these are followed by explanations of the articles of each agreement.