The Australian Government today formalised its commitment to trans-Tasman triangular tax reform.
The reforms enhance the already strong Closer Economic Relations agreement between Australia and New Zealand by further promoting economic integration of the two capital markets.
Triangular taxation occurs where Australian shareholders in a New Zealand company operating in Australia are unable to access Australian franking credits arising from the payment of Australian tax by a New Zealand company.
A similar problem applies for New Zealand shareholders of Australian companies operating in New Zealand.
Today's exchange of formal letters by the Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, and the New Zealand Minister for Economic Development, Jim Anderton, is a further strengthening of trans-Tasman economic relations.
The Ministers attended a forum of Australia-New Zealand Trade Ministers held in Sydney to underline the importance of the Closer Economic Relationship, the free trade agreement between the two countries, in its 20th year.
"The reforms will improve the ease of trans-Tasman capital flows by eliminating a layer of tax," Senator Coonan said.
"Triangular taxation discussions between Australia and New Zealand commenced in 1996. They led to the successful enactment of legislation on triangular tax reform on 30 June 2003 in Australia and progress towards such legislation in New Zealand.
"The exchange of letters recognises Australia's commitment to the Closer Economic Relations agreement and is the formal acknowledgment of the completion of this process."
From 1 October 2003, Australian shareholders of New Zealand companies will be able to access franking credits arising from payment of Australian tax by these companies. New Zealand is also making changes to its imputation provisions to implement triangular taxation reform.