House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Revenue and Financial Services, Minister for Women and Minister Assisting the Prime Minister for the Public Service, the Hon Kelly O'Dwyer MP)

General outline and financial impact

Multilateral Convention

This Bill contains amendments to the Tax Agreements Act to give force of law in Australia to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Convention).

Date of effect: The Multilateral Convention must first enter into force for Australia. This will occur on the first day of the month following three months after Australia deposits with the Secretary General of the OECD its instrument of ratification following the completion of the necessary implementing domestic procedures.

Once the Multilateral Convention enters into force for Australia (and subject to its entry into force for the relevant partner jurisdiction), it will affect Australia's existing tax agreements with its relevant partner jurisdictions as follows:

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in respect of withholding tax on amounts paid or deemed to be paid to a non-resident on or after 1 January occurring on or after the later date of entry into force of the Multilateral Convention for Australia and each of its relevant partner jurisdictions;

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in respect of all other taxes levied by Australia in relation to income, profits or gains of any income year beginning on or after six months after the later date of entry into force of the Multilateral Convention for Australia and each of its relevant partner jurisdictions;

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in respect of the mutual agreement procedure and mandatory binding arbitration, generally, the later date of entry into force of the Multilateral Convention for Australia and each of its relevant partner jurisdictions.

Proposal announced: The Acting Minister for Revenue and Financial Services and the Minister for Trade, Tourism and Investment issued a joint media release on 8 June 2017 (Australia signs new multilateral convention to prevent tax avoidance) which stated that Australia had signed the Multilateral Convention and that legislation would be introduced to give the Convention the force of law in Australia.

Financial impact: This measure is estimated to have an unquantifiable gain to revenue over the forward estimates period as follows

- Nil * Unquantifiable

Human rights implications: This Bill engages and is compatible with human rights. See Statement of Compatibility with Human Rights - Chapter 7, paragraphs 7.1 to 7.5.

Compliance cost impact: The Multilateral Convention modifies existing bilateral tax agreements to prevent them from being exploited for tax avoidance purposes and to improve taxpayer dispute resolution mechanisms within the agreements. No significant additional compliance costs are expected to result from its entry into force.