Double taxation agreements
Do you have foreign-sourced income? Be sure you’re not paying tax twice!
Australia has entered in a number of comprehensive double taxation agreements with many other countries to avoid tax having to be paid to multiple jurisdictions – and also to prevent fiscal evasion by those who do not declare foreign income.
Double taxation agreements (DTAs) essentially override domestic income tax provisions. When Australian tax residents have foreign income, the DTA for the country where that income is sourced needs to be reviewed to determine whether the income is taxable in Australia, taxable in the country of source or taxable in part in both countries.
DTAs are subject to constant revision, however the Treasury maintains a list of tax treaties including agreed tax limits for unfranked dividends, interest and royalties.
The transfer pricing provision provides a legislative framework for dealing with arrangements under which profits are shifted out of Australia, primarily through the mechanism of inter-company and intra-company transfer pricing.
In recent years the ATO has devoted significant resources to the enforcement of these rules, resulting in an outpouring of lengthy public rulings on various aspects of the fundamental concept of arm’s length pricing.
Due to an in-depth understanding of how double taxation agreements, Greenhalgh Pickard accountants can make them work for you and your business to ensure you don’t pay your taxes twice.
John Greenhalgh and Andrew Patrick are both experienced in the field of double taxation agreements (DTAs).
If you need advice relating to DTAs and how this impacts your tax obligations, call (07) 5444 1022.
What types of foreign income should be declared?
Due to the Common Reporting Standard for the collection, reporting and exchange of financial account information, the ATO receives data from other tax jurisdictions for Australian residents making it far more difficult to hide income overseas so voluntary disclosure is wise – especially given DTAs in place.
All foreign income should be declared, including:
Bank interest
Investments
Dividends received
Employment income
Director fees
Rental income from a foreign property
Superannuation fund income streams or pensions
Business and consulting
Proceeds from the sale of a foreign asset
Royalties
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