Foreign tax relief
Australian-resident individuals (who are not temporary residents) are subject to Australian tax on their worldwide income, with a foreign income tax offset (FITO) allowed for most foreign income taxes paid to the extent of Australian tax payable on foreign sourced and foreign taxed amounts. Such offsets are, subject to some additional restrictions, also available to non-residents.
Australia has tax treaties with many countries throughout the world. Under the treaties some forms of income are exempt from tax or qualify for reduced rates. These include royalties, dividends, and capital gains.
Below is a list of countries with which Australia currently has a tax treaty:
|Austria *||Isle of Man *||Romania|
|British Virgin Islands *||Italy||Samoa *|
|Cook Islands *||Korea||Spain|
|Czech Republic||Malaysia||Sri Lanka|
|Fiji||Marshall Islands *||Switzerland|
|Guernsey *||New Zealand||United Kingdom|
|India||Papua New Guinea||Vietnam|
* Limited to allocation of taxing rights in respect of certain income derived by specified individuals, such as retirees, government employees, and students.
The Australian government plans to enter into new and updated tax treaties in the coming year. It has signed a new treaty with Iceland on 12 October 2022 (yet to enter into force).
Australia has also entered into bilateral agreements with a number of countries in relation to the exchange of information in relation to taxes.
Australia has enacted the Organisation for Economic Co-operation and Development (OECD) Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI), which was signed by Australia on 7 June 2017. The MLI has been ratified, which means that it applies to ‘covered countries’, such as Belgium, Canada, France, India, Indonesia, Ireland, Japan, Korea, New Zealand, Singapore, and the United Kingdom.