Tony Smith (Casey, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

This bill before the parliament is a non-controversial bill. It has the coalition’s support. It is a bill to amend the International Tax Agreements Act 1953 to incorporate into Australian law a protocol amending the agreement between our government and the government of the Republic of South Africa for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. The protocol itself updates that existing agreement between both of our governments in the respects I have just outlined. It was entered into originally in 1999. The updated protocol, as the Minister for Competition Policy and Consumer Affairs made clear in his second reading speech, was signed on 31 March this year.

The existing agreement was negotiated and implemented by the previous government and illustrates our longstanding commitment to encouraging foreign investment and opportunities for Australian businesses in overseas markets. The existing agreement contained a most favoured nation obligation within the non-discrimination article, and the article was triggered—I think the minister pointed this out in his speech—by the renegotiated Australia-United Kingdom tax treaty that came into effect in 2003. Departmental negotiations subsequently commenced to protect taxpayers operating in the other country from discriminatory tax practices, and I am optimistic that this updated protocol will encourage foreign investment and provide further opportunities for Australian businesses in overseas markets. Specifically, as has been outlined in the introductory speech, the protocol that this law will give effect to lower withholding tax rates on interest and royalties. This aligns the withholding tax rate limits for royalties and dividends more closely with the OECD practice.

Since the existing agreement was negotiated in 1999, South Africa has changed its domestic tax treatment of corporate profits, and to address this change, as was outlined, the updated protocol provides a five per cent withholding tax rate for all non-portfolio intercorporate dividends. This provision will be beneficial for Australian non-portfolio investors in South Africa. The updated protocol also provides a 15 per cent withholding tax rate for all other dividends. It brings, additionally, capital gains tax treatment into alignment with the OECD model and also introduces some integrity measures to protect and secure revenue. The protocol facilitates increased cooperation between Australian and South African tax authorities with respect to reducing fiscal evasion. South Africa is Australia’s largest trading partner in Africa. In 2007, Australian exports to South Africa were valued at around $2½ billion. South Africa is also the source of a substantial proportion of foreign investment from Africa.

The negotiations for this updated protocol, as I said at the outset, began under the previous government. The bill gives effect to that protocol in this parliament. It has our support and has the bipartisan support of this House. I commend the bill to the House.

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