New Australia - NZ double tax agreement

Articles Written by Prashanth Kainthaje (Partner)

Introduction

The International Tax Agreements Act (No. 1) 2010 (Cth) has enacted into Australian domestic law Australia's new Double Tax Agreement with New Zealand (DTA). This article highlights some of the key features of the DTA.

Persons covered

The DTA applies to 'persons' who are tax resident in either or both of Australia or New Zealand (each, a Contracting State). The term 'persons' is defined to include individuals, trusts, partnerships, companies and any other body of persons.

The DTA also applies to tax residents of third countries as the non-discrimination article applies to nationals of either Australia or New Zealand. In addition, the mutual agreement procedure, the exchange of information article and the assistance in collection of tax debts article apply if the third country tax residents are nationals of Australia or New Zealand.

Application of DTA to fiscally transparent entities

Article 1(2) of the DTA addresses the issues that arise in relation to income derived by or through entities that are fiscally transparent with respect to that income (e.g. certain partnerships, trusts and hybrid entities). The provision applies where one or more fiscally transparent entities are interposed between the income and the participant who is ultimately liable to tax on the income. The application of the DTA is determined by reference to the residence of the participant ultimately liable to tax on the income, profits and gains derived by the fiscally transparent entity.

In broad terms, none of the income derived by fiscally transparent entities will be considered to be derived by a resident of one country if another resident is treated under the tax laws of that country as deriving the item of income. In particular, Article 1(2) ensures that the benefits of the DTA will apply where income, profits or gains are derived from sources in one country through:

  • an entity organised in the other country which is treated as fiscally transparent in the other country. For example, New Zealand source income derived by an Australian resident trust which is taxed in the hands of the beneficiaries;
  • an entity that is organised in the other country and is treated as a taxable entity in the other country, but is fiscally transparent under the laws of the source country. For example, New Zealand source income derived by an Australian limited partnership; or
  • a third country entity which is treated as fiscally transparent in the other treaty country. For example, New Zealand source income derived by a limited liability company established in the United States of America by members who are Australian tax residents.

Taxes covered

The taxes covered for Australia under the DTA are income tax (including capital gains tax (CGT)), petroleum rent resources tax and fringe benefits tax. For New Zealand, the taxes covered are income tax and fringe benefits tax.

Subject to the exceptions in this paragraph, the DTA does not cover goods and services tax, customs duties, stamp duties and other taxes imposed by the Australian States. However, the non-discrimination provision applies to all Federal and State taxes, but not taxes imposed by local governments.

Furthermore, provisions dealing with the exchange of information and assistance in collection of taxes cover all Federal taxes administered by Australia's Federal Commissioner of Taxation.

Insofar as New Zealand is concerned, the non-discrimination article applies to all New Zealand taxes except taxes imposed by local governments. Furthermore, the provisions dealing with exchange of information assistance in the collection of taxes applies to all New Zealand taxes.

Residents

Article 4 sets out how the residence of a person is to be determined for the purposes of the DTA. This is one of the most crucial provisions of the DTA, as residence in either Australia or New Zealand is necessary in order to obtain relief under the DTA.

The term 'resident of a Contracting State' for the purposes of the DTA means any person who, under the laws of that Contracting State, is 'liable to tax as a resident of that Contracting State'. The term does not include a person who is liable to tax in that Contracting State only in respect of income from sources in that Contracting State.

The expression 'liable to tax as a resident' captures those persons who are subject to comprehensive taxation under Australia's or New Zealand's domestic tax laws. For the purposes of the DTA, a person can be regarded as liable to tax as a resident of a country even where the country in question does not in fact impose tax on the person. For example, a charitable institution is exempt from tax in Australia. It will, nonetheless, be regarded as a resident of Australia for the purposes of the DTA.

Tie breakers

Insofar as individuals are concerned, if an individual is resident in both Australia and New Zealand, then his or her status is determined as follows:

  • the individual is deemed to be a resident only of the Contracting State in which he or she has a permanent home available to him or her, but if a permanent home is available in both Contracting States, or in neither of them, the individual is deemed to be a resident only of the Contracting State where the individual's personal and economic relations are closer (commonly referred to as the centre of vital interests test);
  • if residence cannot be determined under the centre of vital interests test, the individual is deemed to be a resident of the Contracting State in which the individual has an habitual abode;
  • if the individual has an habitual abode in both countries, or in neither of them, the individual is deemed to be a resident of the Contracting State of which the individual is a national.

Insofar as the residence of companies is concerned, where a company is a resident in both Australia and New Zealand, that company is resident where the place of the effective management is situated.

Dual listed companies

There is also a specific provision dealing with 'dual listed company arrangements'. Where such an arrangement exists, each company in the dual listed company arrangement is deemed to be a resident in the Contracting State in which it is incorporated if that company has its primary listing in that Contracting State in circumstances where that company is otherwise a resident of both Australia and New Zealand.

Transitional residents of New Zealand

Interestingly, where an individual derives income, profits or gains and is exempt from tax in New Zealand by reason of being a transitional resident under the tax law of New Zealand, the DTA provides no relief or exemption from Australian tax in respect of the income, profits or gains of the transitional resident. There is no corresponding provision in the DTA dealing with an individual who is a 'temporary resident' under Australian tax law. The Explanatory Memorandum that accompanied the International Tax Agreements Bill (No. 2) 2009 (Bill) confirms this.

Managed Investment Trusts

There are also specific provisions dealing with the residency of managed investments trusts (MITs). The term 'MIT' has the same meaning as it does for the purposes of Australian tax law (see section 12-400 of Schedule 1, Part 2-5, Division 12 of the Taxation Administration Act 1953 (Cth)).

The DTA applies to MITs that receive income, profits or gains arising in New Zealand. Relevantly, the MIT is to be treated as an individual resident in Australia that is the beneficial owner of the income, profits or gains it receives, but only to the extent that residents of Australia are the owners of beneficial interests in the MIT.

However, if:

  • the MIT has its principal class of units listed on the Australian Securities Exchange, or any other recognised stock exchange and its principal class of units is regularly traded on one or more of the recognised stock exchanges; or
  • at least 80% of the value of beneficial interests in the MIT is owned by Australian residents,

the MIT is treated as an individual resident of Australia that is the beneficial owner of all income, profits or gains it receives.

The purpose of the provisions dealing with MITs is to facilitate the claiming of treaty benefits with respect to investments in New Zealand held by MITs. The rationale for this is that it is practically difficult for many investors in widely held MITs to claim treaty benefits in the source country individually.

Permanent establishment

As with most tax treaties, the term 'permanent establishment' is expressed to be a fixed place of business through which the business of an enterprise is wholly or partly carried on. To be a permanent establishment within the primary meaning of that term the following requirements must be met:

  • it must be a place of business;
  • the place of business must be fixed - both in terms of physical location (usually) and in terms of time; and
  • the business of the enterprise must be carried on through this fixed place.

Other paragraphs of the permanent establishment article elaborate on the meaning of the term by giving non-exhaustive examples on what may constitute a permanent establishment - for example, an office, a factory, a place of extraction of natural resources (such as a mine, oil or gas well or quarry) or an agricultural, pastoral or forestry property.

A building site, construction or installation project constitutes a permanent establishment only if it lasts for more than 6 months. How this interacts with the general definition of 'permanent establishment' is unclear. That said, the Explanatory Memorandum that accompanied the Bill noted that the respective delegations that negotiated the DTA had agreed that a permanent establishment:

'… will exist where building sites or projects last for more than six months regardless of whether or not the paragraph 1 test has been satisfied. Sites and projects that last for less than six months can never constitute a permanent establishment.'

The DTA also provides for a number of instances of 'deemed' permanent establishments. In particular, a permanent establishment will be deemed to exist where an enterprise of a Contracting State:

  • performs services in the other Contracting State:
    • through an individual who is present in the other Contracting State for a period or periods exceeding an aggregate of 183 days in any 12 month period, and more than 50% of the gross revenue attributable to active business activities of the enterprise during this period or periods is derived from services performed in that Contracting State through that individual; or
    • for a period or periods exceeding in the aggregate 183 days in any 12 month period, and these services are performed for the same project or for connected projects through one or more individuals who are present and performing such services in that other State;
  • carries on activities (including the operation of substantial equipment) in the other Contracting State in the exploration for or exploitation of natural resources or standing timber situated in that other Contracting State for a period or periods exceeding in the aggregate 90 days in any 12 month period; or
  • operates substantial equipment in the other Contracting State for a period or periods exceeding in the aggregate 183 days in any 12 month period. The word 'operates' has apparently been included to clarify that only active use of substantial equipment assets will be captured. This means that an enterprise that merely leases substantial equipment to another person for that other person's own use in a country would not be deemed to have a permanent establishment in that country.

However, the above is subject to a number of carve outs set out in the DTA.

Activities that are deemed not to be a permanent establishment include:

  • use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to an enterprise;
  • maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
  • maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
  • maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information for the enterprise;
  • maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character; or
  • maintenance of a fixed place of business solely for any combination of activities mentioned above;

provided that such activities are, in relation to the enterprise, of a preparatory or auxiliary character.

This proviso is a departure from the OECD Model tax treaty. The Explanatory Memorandum to the Bill states that this is to prevent the situation where enterprises structure their business so that most of their activities fall within the stated exceptions for the purpose of avoiding tax in a particular Contracting State. The Explanatory Memorandum also observes that where the listed activities are not preparatory or auxiliary in relation to the enterprise, the enterprise will not be excluded from having a permanent establishment. The carve outs in the DTA should be contrasted with many of Australia's other tax treaties, including Canada, China, Germany, India, Indonesia, Japan, Papua New Guinea, the United Kingdom and the United States of America.

Income from real property

Article 6 of the DTA deals with income derived by a resident of a Contracting State from real property. In essence, priority is given to the source country.

Interestingly, Article 6 of the DTA is also extended to income derived from real property of an enterprise. Profits of such enterprise are to be determined in accordance with the business profits article (which is discussed below) as if such income were attributable to a permanent establishment in the Contracting State in which the real property is situated. In this way, this provision provides that the Contracting State in which the real property is situated may impose tax on income derived from the property by an enterprise of the other Contracting State, irrespective of whether that income is attributable to a permanent establishment of such an enterprise situated in the first mentioned Contracting State. Notwithstanding that the profits are dealt with under Article 6, and not under the business profits article (as is usually the case under other Australian tax treaties), such profits will be taxed on a net basis.

Business profits

Article 7 of the DTA is concerned with the taxation by one Contracting State of business profits derived by an enterprise that is a resident of the other Contracting State. In general terms, the taxing of business profits of an enterprise of one Contracting State is dependent upon whether they are attributable to the carrying on of a business through a permanent establishment in the other Contracting State. If a resident of one Contracting State carries on a business through a permanent establishment (as defined in Article 5 of the DTA) in the other Contracting State, the Contracting State in which the permanent establishment is situated may tax the profits of the enterprise that are attributable to that permanent establishment. In contrast, an enterprise of a Contracting State will generally not be liable to tax in the other Contracting State on business profits if the enterprise's business profits are not attributable to a permanent establishment in that other Contracting State, except where Article 7(7) applies.

Article 7(7) of the DTA provides that where profits which are derived by a resident of a Contracting State (whether directly or through one or more interposed trusts) who is a beneficiary of a trust in circumstances where the trustee has or would have a permanent establishment in the other Contracting State, then the business profits of the enterprise carried on by the trustee through such a permanent establishment shall be deemed to be a business carried on in the other Contracting State by the resident. Article 7(7) ensures that such business profits will be subject to tax in Australia where a trustee of the relevant trust has, or would have if they were a resident of New Zealand, a permanent establishment in Australia in relation to that business: cf. GE Capital Finance Pty Ltd v Federal Commissioner of Taxation (2007) 159 FCR 473.

Business profits of a permanent establishment are determined on the basis of arm's length dealings - this is consistent with comparable provisions in Australia's other tax treaties and with international practice. However, a new development is a 7 year time limit for the adjustment of profits attributable to a permanent establishment of an enterprise. A Contracting State may not make an adjustment to the profits for a year of income where a period of 7 years has expired from the date on which the enterprise completed the filing requirements for that year of income in that Contracting State. This time limit does not apply in the case of fraud, or in respect of negligence or wilful default or where an audit into the profits of an enterprise was initiated by that country within the 7 year period.

Shipping and air transport

Article 8 of the DTA provides that the right to tax profits from the operation of ships or aircraft in international traffic, including a share of profits attributable to participation in a pooling service or other profit sharing arrangement, is generally reserved to the country in which the operator is tax resident.

Profits from the operation of ships or aircraft in international traffic also include profits for the use, maintenance or rental of containers (including trailers and related equipment for the transport of containers) used in the transport of goods or merchandise, provided such use, maintenance or rental is directly connected or ancillary to the operation of ships or aircraft in international traffic.

Dividends

Dividend withholding tax is limited to:

  • zero for inter-corporate dividends on non-portfolio holdings of 80% or more (whether held directly or indirectly) provided the shares in the company paying the dividend have been held for more than 12 months ending on the day the dividend is declared and provided that the recipient of the dividends:
    • has its principal class of shares listed on a recognised stock exchange and this class of shares is regularly traded on one or more recognised stock exchanges; or
    • is owned directly or indirectly by one or more companies:
  • whose principal class of shares is listed on a recognised stock exchange and is regularly traded on one or more recognised stock exchanges; or
  • which, if that company or each of those companies owned the holding directly in respect of which the dividends are paid, would be entitled to equivalent benefits in respect of such dividends under a tax treaty between the Contracting State of which that company is a resident and the Contracting State of which the company paying the dividend is resident; or
  • has been granted the benefit of the zero rate by agreement of Australia's Federal Commissioner of Taxation or New Zealand's Commissioner of Inland Revenue.
  • zero for dividends beneficially owned by a Contracting State, a political subdivision of that Contracting State or a local authority where the Contracting State, a political subdivision of that Contracting State or local authority has direct holdings of no more than 10%;
  • 5% for inter-corporate dividends on non-portfolio holdings (i.e. holdings of 10% or more); and
  • 15% in all other cases.

The DTA does not define 'regularly traded' and the question arises whether a company whose shares are temporarily suspended from trading at the time the dividend is declared is precluded from obtaining the exemption from dividend withholding tax.

The expression 'regularly traded' is also used in the limitation of benefits article of Australia's tax treaty with the United States of America and appears to be based on the limitation of benefits article of the United States Model Income Tax Convention of 15 November 2006 (Convention). The Technical Explanation for the Convention makes the following observations in relation to 'regularly traded':

'The term 'regularly traded' is not defined in the Convention. In accordance with paragraph 2 of Article 3 (General Definitions), this term will be defined by reference to the domestic tax laws of the State from which treaty benefits are sought, generally the source State. In the case of the United States, this term is understood to have the meaning it has under Trea. Reg. section 1.884-5(d)(4)(i)(B), relating to branch tax provisions of the Code. Under these regulations, a class of shares is considered to be 'regularly traded' if two requirements are met: trades in the class of shares are made in more than de minimis quantities on at least 60 days during the taxable year, and the aggregate number of shares in the class traded during the year is at least 10 percent of the average number of shares outstanding during the year. Sections 1.884-5(d)(4)(i)(A), (ii) and (iii) will not be taken into account for purposes of defining the term 'regularly traded' under the Convention.'

It is unclear whether it was intended that the term 'regularly traded' as used in the DTA was to have this meaning. It may well be the case that a company whose shares are thinly traded may not obtain the benefit of the zero rate dividend withholding tax.

Interest

Interest withholding tax is subject to a 10% limitation. But the new DTA reduces the rate of interest withholding tax to zero where interest is paid to:

  • government bodies or central banks;
  • financial institutions, unless, in the case of interest paid from New Zealand, the interest is paid by a person who has not paid New Zealand's 2% approved issuer levy. A most favoured nation provision applies if New Zealand subsequently provides better treatment in respect of such interest in another tax treaty.

Royalties

Royalties will be subject to a royalty withholding tax of no more than 5%.

The definition of royalties reflects most elements of the definition in Australia's domestic income tax law.

Royalties include payments for the supply of information concerning technical, industrial, commercial or scientific experience but not payments for services rendered, except as provided for in Article 12(3)(c). The DTA adopts the OECD Model approach in referring to 'information concerning technical, industrial, commercial or scientific experience' rather than the more usual reference in Australian tax treaties to 'knowledge or experience'. That said, the Explanatory Memorandum to the Bill states that both expressions refer to what is commonly known as know-how. The definition also includes payments for the use of intellectual property stored in various media and used in connection with television, radio or other broadcasting (for example, satellite, cable and internet and broadcasting).

Interestingly, payments for the right to use industrial, commercial or scientific equipment do not appear in the definition under the DTA. This is because such amounts will either be taxed under the business profits article or the shipping and air transport article. The exclusion of such payments from the royalties article reflects international tax treaty practice and recognises that source country taxation on a gross basis may well be excessive given low profit margins.

Alienation of property

Article 13 of the DTA allocates taxing rights between Australia and New Zealand with respect to revenue and capital gains derived from the alienation of property. The starting point is Article 13(5) of the DTA. Article 13(5) provides that gains of a capital nature are only taxable in the Contracting State of the taxpayer's residence unless Articles 13(1)-(4) of the DTA apply.

Article 13(1) of the DTA provides that the income, profits or gains from the alienation of real property may be taxed by the Contracting State in which the real property is situated. Article 13(2) of the DTA provides the income, profits or gains derived from the alienation of property forming part of the business property (other than real property) of a permanent establishment situated in a Contracting State may be taxed in the Contracting State in which the permanent establishment is situated.

In contrast, Article 13(3) of the DTA provides that the income, profits or gains of an enterprise of a Contracting State derived from the alienation of ships or aircraft operated by that enterprise in international traffic or of property (other than real property) pertaining to the operation of such ships or aircraft is only taxable in the Contracting State of which the enterprise is resident.

Article 13(4) of the DTA provides that the income, profits or gains derived by a resident of a Contracting State from the alienation of any shares or comparable interests deriving more than 50% of their value directly or indirectly from real property situated in the other Contracting State may be taxed in the other State. In broad terms, this is consistent with Australia's CGT regime as it applies to nonresidents of Australia.

Article 13(6) of the DTA has been included to prevent the double taxation of capital gains of departing residents. Under Australia's CGT regime, a person who ceases to be a resident of Australia will generally be taxed on unrealised gains on CGT assets held at that time, other than assets that are taxable Australia property. However, an individual ceasing to be a tax resident of Australia can elect to either pay tax at the time of departure (based on the difference between the market value of non-taxable Australian property assets at the time of departure and the cost base of those assets) or to defer the tax on any gain until the actual disposal of those non-taxable Australian property assets. In either case, that individual is treated as having alienated and re-acquired the nontaxable Australia property assets for an amount equal to their fair market value at the time the individual ceases to be an Australian tax resident for the purpose of New Zealand's tax law (which currently does not generally tax capital gains).

Article 13(7) of the DTA provides that the provisions of Article 13 of the DTA shall not affect the right of Australia to tax, in accordance with its laws, income, profits or gains from the alienation of any property derived by a person who has been a resident of Australia at any time during the year of income in which the property is alienated, or has been so resident in Australia at any time during the 6 years immediately preceding the year in which property is alienated. As noted above, under Australia's CGT regime, ceasing to be a tax resident of Australia triggers a CGT liability on unrealised gains in respect of non-taxable Australian property. However, under Australia's CGT regime an individual can elect to disregard any capital gain or capital loss from a CGT asset that is non-taxable Australian property until the time of actual disposal of the non-taxable Australian property. Without Article 13(7), Article 13 would not allow Australia to tax a gain that arises from the subsequent disposal of non-taxable Australia property because of Article 13(5). Given that New Zealand does not have a comprehensive CGT regime, there may be cases where ceasing to be an Australian resident will result in no tax being payable in Australia or New Zealand from capital gains from the disposal of non-taxable Australian property (i.e. if an individual elects to defer tax until subsequent disposal and this occurs more than 6 years after cessation of Australian residence).

Income from employment

Article 14 of the DTA deals with salaries, wages and similar remuneration. This Article does not deal with fringe benefits, directors' fees, entertainers and sportspersons, pensions and government service as these items are dealt with by separate provisions of the DTA.

In general terms, salaries, wages and similar remuneration derived by a resident of a Contracting State from an employment exercised in the other Contracting State may be taxed in the other Contracting State. However, subject to certain conditions, there is a conventional provision for exemption from tax in the Contracting State where employment is exercised where the employee's visits are only of a short term nature.

Specifically, Article 14(2) of the DTA provides that remuneration derived by a resident of a Contracting State in respect of an employment exercised in other Contracting State is taxable only in the first mentioned Contracting State (i.e. the Contracting State of residence) if the:

  • recipient is present in the other Contracting State for a period or periods not exceeding an aggregate of 183 days in any 12 month period commencing or ending in the year of income of that other Contracting State;
  • remuneration is paid by, on behalf of, an employer who is not a resident of the other Contracting State, or is borne by or deductible in determining the profits attributable to a permanent establishment which the employer has in the first mentioned Contracting State; and
  • remuneration is neither borne by, nor deductible in determining the profits attributable to, a permanent establishment which the employer has in the other Contracting State.

Article 14(3) of the DTA provides that remuneration derived by a resident of a Contracting State in respect of the employment exercised aboard a ship or aircraft operated in international traffic is taxable only in the Contracting State of residence.

Secondments

Of interest to employers in both Australia and New Zealand is Article 14(4) of the DTA, which deals with secondments. Article 14(4) provides that, notwithstanding the preceding provisions of Article 14, remuneration derived by an individual who is a resident of a Contracting State in respect of a secondment to the other Contracting State shall be taxable only in the first mentioned Contracting State (i.e. the Contracting State of residence) where the individual is present in the other Contracting State (i.e. the Contracting State of source) for a period or periods not exceeding an aggregate of 90 days in any 12 month period (as opposed to 183 days under Article 14(2)).

A 'secondment' for the purposes of Article 14(4) of the DTA is an arrangement under which an employee of an enterprise of a Contracting State, being the enterprise with which the employee has a formal contract of employment, temporarily performs employment services in the other Contracting State for a permanent establishment of the enterprise situated in that other Contracting State, or for an associated enterprise, where such employment services are of a similar nature to those ordinarily performed by the employee of the first mentioned enterprise. There is a specific anti-avoidance rule in that an arrangement that have as one of its main purposes the obtaining of benefits under Article 14(4) are excluded from being treated as secondments for the purposes of the DTA.

Fringe benefits

The DTA is one of the few Australian tax treaties that deals explicitly with fringe benefits. Article 15(1) of the DTA provides that where a fringe benefit is taxable in both Australia and New Zealand, the benefit will only be taxable in the Contracting State that would have the sole or primary taxing right if the fringe benefit were salary or wages from the employment to which the fringe benefit relates.

Fringe benefits for the purposes of the DTA do not include a benefit arising from the acquisition of an option over shares under an employee share scheme. Oddly, there is no specific exclusion relating to the acquisition of a share - as distinct from an option over share - under an employee share scheme.

Directors' fees

Article 16 of the DTA allocates taxing rights with respect to directors' fees. In order to avoid difficulties in ascertaining in which Contracting State a director's services are performed, and consequently where their remuneration is to be taxed, Article 16 provides that directors' fees may be taxed in the Contracting State in which the company of which he or she is a director is resident.

Entertainers and sports persons

Article 17(1) provides that income derived by a resident of a Contracting State as an entertainer or as a sportsperson from that person's personal activities as such exercised in the other Contracting State may be taxed in the other Contracting State. The source country also has the right to tax any amount from the activities of an entertainer or sportsperson in that Contracting State that accrues not to the entertainer or sportsperson but to another person - e.g. a company or trust associated with the entertainer or sportsperson. In other words, priority is given to the Contracting State of source.

There is, however, an exception for members of teams playing in 'league competitions'. Income derived in respect of personal activities exercised by sportspersons as members of recognised teams regularly playing in a league competition organised and conducted in both Contracting States, but not in respect of performances as a member of a national representative team of either Contracting State, is excluded from the operation of Articles 17(1)-(2) of the DTA. In such cases, the business profits article or the income from employment article will apply. Accordingly, New Zealand residents are generally exempt from Australian tax in respect of income relating to their activities as members of such teams. However, where the particular sportsperson in question has a permanent establishment in Australia or if the conditions in Article 14(2) apply, Australia may tax that income.

Pensions

Article 18 of the DTA deals with pensions. Specifically, Article 18 of the DTA provides that pensions, including government pensions, and other similar periodic remuneration paid to a resident of a Contracting State shall be taxable only in that State. However, a pension arising in one country and paid to a resident of the other country will not be subject to tax in the country of residence to the extent that the income would not have been subject to tax in the first country if the recipient was a resident of that country.

Concluding comments

This article has discussed some of the principal features of the DTA. Professional advice should be obtained in relation to both New Zealand and Australian tax law, as well as the application of the DTA, before any relevant transaction is implemented.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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