Tax Treaty Case Law around the Globe 2021

S. 224I. Introduction

Traditionally, Australia has not included a non-discrimination Article (NDA) in its treaties. This position was consistent with a 1977 reservation that was withdrawn in 2008. This 31 year reservation was probably based on concerns about the potential erosion of source taxing rights that could impact on both withholding tax regimes and anti-avoidance rules (such as thin capitalization rules). Although these rules are not intended to be discriminatory, they may be discriminatory in form. There was also a belief that an NDA was inconsistent with the aim of comprehensive tax treaties (i.e. to divide up taxing rights so as to prevent double taxation and fiscal evasion).

The only exception to this position, prior to 2002, was the Australia-United States Income Tax Treaty (1982) that contained an NDA. However, that NDA was not given the force of law in Australia as it would have triggered most favoured nation provisions in other existing treaties that would have required Australia to adopt similar provisions.

Changes to Australia’s treaty practice in the early 2000s resulted in NDAs broadly consistent with Article 24 of the OECD Model being included from 2002 in all Australia...