Sladen Snippet - International Tax Complexities for individuals – Double Tax Agreements

In an every day more globalised world, trade, technology and the ease in which individuals move around the globe have created considerable opportunities for Australian individuals and foreigners who have decided to establish themselves in Australia. The downside to this: the tax complexities that affect those who maintain our relationship with a foreign jurisdiction.

Double Tax Agreements (DTAs) are used to minimise or eliminate the risks of individuals being taxed twice in respect of the same income and capital receipts. Currently, Australia has DTAs with 44 countries. The DTAs are designed to control the way in which income is taxed by Australia and the other relevant country when both jurisdictions claim the right to tax the same taxpayer in respect of the same subject matter and for identical periods.

Most DTAs follow either the Organisation for Economic Cooperation and Development (OECD) Model Tax Convention for Income and Capital or the United Nations Model Double Taxation Convention. In brief, the DTAs contain provisions which may apply to individuals where:

  • rental income is derived from property located in a foreign jurisdiction;
  • capital gains arise from the sale of property located in a foreign jurisdiction;
  • income is derived from employment in a foreign jurisdiction;
  • business income derived in a foreign jurisdiction;
  • income is derived by Australian entertainers or sportspersons in respect of activities exercised while in a foreign jurisdiction;
  • dividends are paid to an Australian resident by a foreign entity;
  • interest is paid to an Australian resident by a resident of a foreign jurisdiction;
  • royalties are paid to an Australian resident by a resident of a foreign jurisdiction;
  • directors’ fees and similar payments are derived by an Australian resident in his or her capacity as a director of a foreign company;
  • pensions are paid to Australian residents by foreign jurisdictions; and
  • remuneration is paid to an Australian resident by a foreign jurisdiction in respect of government services rendered overseas.

If any of the above circumstances are familiar to you, you may require legal advice regarding the methods for elimination of double taxation available to you in the relevant DTA. Otherwise, you are at risk of paying taxes in more than one jurisdiction. If you suspect that a relevant event does not give rise to taxes either in Australia or elsewhere, care should be taken to confirm such position, as penalties may apply if tax is found to be payable in Australia.

To discuss this article, or for further information please contact:

Patricia Martins
Lawyer
Sladen Legal
T +61 3 9611 0138
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia
E: pmartins@sladen.com.au

Daniel Smedley
Principal | Accredited Specialist in Tax Law
Sladen Legal
M +61 411 319 327|  T +61 3 9611 0105
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia
E: dsmedley@sladen.com.au

Neil Brydges
Special Counsel | Accredited specialist in Tax Law
Sladen Legal
M +61 407 821 157 | T +61 3 9611 0176
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia  
E: nbrydges@sladen.com.au

Daniel Smedley