The treaty specifies that for the purposes of the tax laws of Australia and Timor-Leste, the JPDA is deemed to be part of Australia and Timor-Leste. Therefore, income derived from working in the JPDA is sourced in both Australia and Timor-Leste.
The effect of the treaty is that:
- residents of Australia are taxed on their total JPDA income at resident rates of tax, with a foreign income tax offset allowed for the lesser of the
- Australian tax payable on the net assessable JPDA income*, and
- tax paid to Timor-Leste
- residents of Timor-Leste are taxed on 10% of their net assessable JPDA income* at non-resident rates of tax
- residents of countries other than Australia and Timor-Leste are taxed on their total JPDA income at non-resident rates of tax, with a tax offset allowed equal to 90% of the Australian tax payable on their net assessable JPDA income*.
* Net assessable JPDA income is assessable JPDA income less allowable deductions relating to that income.