The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Nick Sherry

Nick Sherry

Assistant Treasurer

9 June 2009 - 14 September 2010

Media Release of 29/06/2009


Joint Media Release
The Hon Simon Crean MP
Minister for Trade

New Tax Treaty signed with New Zealand

The Minister for Trade, Simon Crean, and the Assistant Treasurer, Senator Nick Sherry, today announced that Australia and New Zealand have signed a new tax treaty to replace the existing treaty and amending protocol. The new treaty was signed by Mr Crean in Paris on 26 June, 2009.

"Australia and New Zealand continue to strengthen their economic links and move towards an integrated trans-Tasman economy under the Closer Economic Relations trade agreement and the Single Economic Market initiative. This treaty represents an important further step in those endeavours," Mr Crean said.

"New Zealand is a country with which Australia shares an exceptionally close trade and investment relationship. The changes made by the new treaty to update the taxation arrangements between the countries will be of benefit to both the Australian and New Zealand economies," the Assistant Treasurer said.

While changes were made to the treaty in 2005 to strengthen its integrity aspects, the provisions of most interest to business and investors, including the rates of withholding tax applicable to dividends, interest and royalty payments, were left unchanged pending finalisation of New Zealand's international taxation law review.

The new treaty reduces withholding tax rate limits on certain dividends, on certain classes of interest, and on royalty payments. These changes reduce the cost to Australian businesses of accessing intellectual property, equity and finance for expansion.

The new treaty will also assist the Australian managed funds industry by providing rules to allow Australia's managed investment trusts to access the treaty's benefits on income derived from New Zealand.

New rules providing time limits on transfer pricing audits, the inclusion of arbitration provisions and a non-discrimination article, as well as new provisions to facilitate short term cross-border secondments will benefit Australian businesses engaged in trans Tasman activities. These changes accord with business and industry's message to the Government in the course of the tax treaty policy review.

The new treaty will commence when both countries advise that they have completed their domestic requirements. Legislation will be introduced into the Parliament as soon as practicable.

29 June, 2009

Appendix - Technical Changes to the Treaty

The new treaty replaces the existing 1995 treaty and its 2005 amending protocol. The new treaty updates the taxation arrangements between the two countries, which will further enhance the close economic relations between Australia and New Zealand.

The new treaty provides that dividends, interest and royalties paid from one country (the source country) to a person who is a resident in the other country will generally remain taxable in both countries, but with limits on the tax that the source country may charge on residents of the other country.


The existing treaty includes a 15 per cent withholding tax rate limit for all dividends.

Under the new treaty, no tax will be chargeable on intercorporate non-portfolio dividends where the recipient holds directly at least 80 per cent of the voting power of the company paying the dividend, subject to certain conditions. A zero tax rate limit will also apply to dividends paid in respect of portfolio investment by a government body, including government investment funds such as Australia's Future Fund.

A 5 per cent rate limit will apply on all other intercorporate non-portfolio dividends where the recipient holds directly at least 10 per cent of the voting power of the company paying the dividend.

A general limit of 15 per cent will continue to apply for all other dividends.


The existing treaty includes a source country interest withholding tax rate limit of 10 per cent.

Under the new treaty, while the general rate of source country tax on interest will continue to be limited to 10 per cent, no tax will be chargeable in the source country on most interest derived by:

  • government bodies, including government investment funds such as Australia's Future Fund, and central banks; or
  • certain financial institutions, provided, in the case of interest paid from New Zealand, that the two per cent New Zealand approved issuer levy has been paid. A Most Favoured Nation provision applies if New Zealand subsequently provides better treatment in respect of such interest in another treaty.


The general withholding tax rate limit for royalties will be reduced from 10 to 5 per cent. The new treaty also extends the meaning of royalty to include amounts paid for spectrum licences. It also provides that amounts derived from the leasing of industrial, commercial or scientific equipment will no longer constitute a royalty for the purposes of the treaty. Such amounts will either be treated as profits from international transport operations or as business profits.

Managed Investment Trusts

Australian Managed Investment Trusts (MITs) will be able to access treaty benefits on income derived from New Zealand to the extent that the MIT is owned by Australian investors. Listed MITs, and MITs in which more than 80 per cent of the interests are held by Australian investors, will be entitled to treaty benefits on all income received from New Zealand.

Services provision

The new treaty amends the definition of permanent establishment to include certain services performed in one country by a resident of the other country. This provision will allow Australia to tax a New Zealand resident entity on income it derives from the provision of services for more than 183 days in a year, where such services are performed through one or more individuals who are present in Australia. It allows New Zealand to tax Australian residents' income in the reverse situation. To minimise the compliance burden on businesses, services performed through an individual who is present for five days or less are generally disregarded for this purpose.


The new treaty also includes a revised pension provision. As in the existing treaty, this provision ensures that pensions and annuities are taxed only in the country of residence of the recipient. However, pensions arising in the other country will now be exempt in the residence country to the extent that they are exempt in the source country. This will encourage mobility of labour by removing impediments to working and accumulating superannuation benefits in both countries.

Income from employment-short trans-Tasman visits

The new treaty also includes a revised provision for the taxation of income from employment. While employees' remuneration will generally be taxable in the country where the services are performed, such income derived during short visits on secondment to one country by a resident of the other country will be exempt in the country visited. This will prevent individuals getting caught up in two tax systems when they are seconded to work for a short time in the other country.


The new treaty will include rules to protect nationals and businesses of one country from tax discrimination in the other country.


Consultation between the two taxation authorities of Australia and New Zealand is authorised by the new treaty. Where issues of fact cannot be resolved between taxation authorities within two years, the taxpayer may request arbitration

Other features

  • The new tax treaty also updates Australia-New Zealand cross border taxation arrangements by:
  • providing rules to deal with income derived by or through fiscally transparent entities;
  • clarifying the residence status of non individual dual residents and of entities participating in dual listed company arrangements;
  • ensuring that income from real property, including natural resource royalties and profits from agriculture, forestry or fishing, derived by an enterprise will be taxed on a net basis by the country in which the property is situated;
  • ensuring that profits derived from the operation of ships and aircraft in international traffic are generally taxed only in the country of residence of the operator;
  • providing rules for the taxation of income, profits or gains from the alienation of real property that allocate taxation rights exclusively to the country of residence of the alienator, unless the gains are from real property or business assets of a permanent establishment situated in the other country; and
  • providing certainty to taxpayers by restricting transfer pricing adjustments to within a seven year period, except where an audit has been initiated or where there is fraud, gross negligence or wilful neglect.