Double taxation is a big concern for many Australians. It can impact investment choices made by investors in Australia and abroad. In part, because of this, many countries are willing to enter into tax treaties with Australia. They want to attract Australian talent and investment into their countries. They want access to Australian markets for their goods and services. They know that under dual taxation, that’s a much harder sell.
Australia has tax treaties with over 40 other countries including the United States. That agreement has been in force since the Reagan Administration of the 1980s. Tax treaties like these limit Australians’ tax liabilities by restricting taxation on different categories to a sensible amount. Double taxation can eliminate profits from investments, and dis-incentivize investment in Australian businesses. In these treaties, the overlapping of tax jurisdictions is acknowledged. The categories of income and how they’re taxed are established and divided among agencies. Residency status in one country is weighed against the other. The sources of income are also considered. Business profits and, in particular, the permanency of a business establishment, is also taken into account.
Tax treaties also set regulations and establish conditions for determining residency. This has big effects on how an individual is taxed. It’s done partly by setting time limits and partly by defining tie-breakers when it comes to dual residents. There are different rules for individuals, businesses, and trusts. There are resources available online at the Australian Taxation Office website to help people figure out what category they fall into. For corporations, trusts and businesses, it depends largely on where the business is incorporated and where its headquarters are located.
Taxation treaties make it possible for a country like Australia to succeed in the global marketplace. Australia has a well-educated, entrepreneurial population, but the size of the Australian market is limited. Nearby neighbors like New Zealand also have a small-sized market in which to sell goods and services. Because of this, it’s important for Australians to be able to invest in foreign enterprise, and for foreign enterprise to be able to easily invest in Australia. Tax treaties that prevent double taxation of Australians make that possible. These agreements make business work for everyone in markets around the world.