John Faulkner (NSW, Australian Labor Party, Cabinet Secretary) Share this | Hansard source

I thank Senator Coonan for her contribution, on behalf of the opposition, to this important piece of legislation and I thank the opposition for their support of the bill. This bill gives the force of law to a new tax protocol with South Africa which will modernise and enhance the bilateral tax treaty arrangements between Australia and South Africa. South Africa is, of course, Australia’s largest and most dynamic market in Africa. South African investment dominates investment from the African continent into Australia.

The protocol updates the taxation arrangements between Australia and South Africa to enhance Australia’s relationship with South Africa by reducing barriers to bilateral trade and investment in the lowering of withholding tax rates on interests and royalties. The protocol also delivers on Australia’s most favoured nation obligation in the existing tax treaty to provide for rules to prevent tax discrimination. The protocol inserts a non-discrimination article which protects Australian nationals and businesses operating in South Africa, and vice versa, from discriminatory tax practices. The protocol was also prompted by proposed changes to South Africa’s own domestic law of taxation of corporate profits. The protocol amends the withholding tax rates applying to dividends, providing a five per cent rate for all non-portfolio intercorporate dividends and a 15 per cent rate for all other dividends.

These changes align with OECD norms and address South Africa’s changes to its domestic law system of taxing corporate profits. Australian non-portfolio investment in South Africa will generally benefit from reduced total South African tax on corporate profits as a result of these changes. The new protocol also includes a number of other key changes. I can report that the treaty has been considered by the Joint Standing Committee on Treaties, which has recommended that binding treaty action be taken. I also commend the bill to the Senate.

Question agreed to.

Bill read a second time.