House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

General outline and financial impact

New Agreements

Indian Protocol

Schedule 1 to this Bill amends the International Tax Agreements Act 1953 (Agreements Act 1953) to give the force of law in Australia to the Protocol Amending the Agreement between the Government of Australia and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (Indian Protocol), which was signed in New Delhi on 16 December 2011.

Date of effect : The Indian Protocol must first enter into force. For entry into force, Australia and India are required to provide notification on the completion of the necessary domestic procedures. Once the Indian Protocol enters into force its provisions will take effect in Australia in three stages:

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in respect of Australian tax on income, profits or gains of any year of income beginning on or after 1 July next following entry into force;

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in respect of Article 24A (Non-Discrimination) and Article 26 (Exchange of Information), upon entry into force; and

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in respect of Article 26A (Assistance in the Collection of Taxes), on a date agreed in an exchange of diplomatic notes.

Proposal announced : This measure was announced on the Treasury website on 22 December 2011.

Financial impact : Unquantifiable, but potentially positive.

Human rights implications : This Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 4, paragraphs 4.1 to 4.4.

Compliance cost impact : The Indian Protocol is broadly consistent with international norms and would generally be expected to reduce compliance costs.

Marshall Islands agreement

Schedule 1 to this Bill amends the Agreements Act 1953 to give the force of law in Australia to the Agreement between the Government of Australia and the Government of the Republic of the Marshall Islands for the Allocation of Taxing Rights with Respect to Certain Income of Individuals and to Establish a Mutual Agreement Procedure in Respect of Transfer Pricing Adjustments (Marshall Islands Agreement), which was signed in Majuro on 12 May 2010.

Date of effect : The Marshall Islands Agreement must first enter into force. For entry into force, Australia and the Marshall Islands are required to provide notification on the completion of the necessary domestic procedures. Once the Marshall Islands Agreement enters into force it will apply in Australia in respect of any income year beginning on or after 1 July in the calendar year next following the date on which it enters into force.

Proposal announced : This measure was announced in the then Assistant Treasurer's Media Release No. 105 of 13 May 2010.

Financial impact : Minimal

Human rights implications : This Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 4, paragraphs 4.1 to 4.4.

Compliance cost impact : No significant compliance costs are expected to result from the entry into force of the Marshall Islands agreement.

Mauritius agreement

Schedule 1 to this Bill amends the Agreements Act 1953 to give the force of law in Australia to the Agreement between the Government of Australia and the Government of the Republic of Mauritius for the Allocation of Taxing Rights with Respect to Certain Income of Individuals and to Establish a Mutual Agreement Procedure in Respect of Transfer Pricing Adjustments (the Mauritius Agreement), which was signed in Port Louis on 8 December 2010.

Date of effect : The Mauritius agreement must first enter into force. For entry into force, Australia and Mauritius are required to provide notification on the completion of the necessary domestic procedures. Once the Mauritius agreement enters into force it will apply in Australia in respect of any income year beginning on or after 1 July in the calendar year next following the date on which it enters into force.

Proposal announced : This measure was announced in the then Assistant Treasurer's Media Release No. 022 of 9 December 2010.

Financial impact : Minimal

Human rights implications : This Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 4, paragraphs 4.1 to 4.4.

Compliance cost impact : No significant compliance costs are expected to result from the entry into force of the Mauritius agreement

Other Amendments

Schedule 1 to this Bill also amends the Agreements Act 1953 to update certain references to some of Australia's existing taxation agreements.

The notes to the definitions of the Aruban agreement , the Guernsey agreement , the Jersey agreement and the Malaysian Protocol (No. 3 ) contained in section 3AAA(1) of that act will be updated to refer to the Australian Treaty Series number of each of those agreements. This will assist readers in accessing the text of each of those agreements.

These amendments are of a minor and technical nature and will not result in any substantive law changes.