Tax Treaty Case Law around the Globe 2020

S. 297Chapter 25 Australia: The Application of the Australia-United States Income Tax Treaty for Relieving Double Taxation and Its Interaction with the Provisions of Domestic Law

Michael Dirkis

25.1. Introduction

The review of the scope of article 22 of the Australia-United States Income Tax Treaty (1982) by the Australian courts came to an end in 2020 with the High Court dismissing the taxpayer’s application for special leave (permission) to appeal against the decision of the Full Court of the Federal Court of Australia (FCFCA) in Burton v. Commissioner of Taxation. This litigation has been controversial, with many international and domestic commentators expressing the view that the Australian courts erred in the interpretation of the Australia-United States Income Tax Treaty (1982) at every stage of the litigation process.

S. 29825.2. Facts of the case

Burton is an Australian resident who, in his capacity as the trustee of an Australian discretionary trust, held investments in the United States. He was also a beneficiary of the trust, entitled to capital gains arising from the sales of US investments (options to participate in certain oil and gas wells). As the sales were of a US “real property i...