NZ-Australia DTA Come into Force

March 22, 2010 International FinanceInternational TaxationNew Zealand FinanceNew Zealand Taxation

The Seat of GovernmentThe Double Taxation Agreement (DTA) between Australia and New Zealand has come into force and will be applied with the new financial year, having been passed into legislature by both Governments.

After much public anticipation the New Zealand Government released a media statement on March 22nd announcing that New Zealand and Australia have given legal effect to the DTA and passed legal notes which to that effect, allowing the agreement to come into effect soon. The newly established withholding rates will apply from May 1st 2010 onwards, and all other changes will begin on April 1st.

Under the now-established tans-Tasman agreement tax-free pensions from one country will remain exempt if the recipient moves to the corresponding nation. Several measures are taken within the DTA which attempt to reduce compliance costs for businesses, and raise tax payer. The agreement also gives strict definitions on a time period in which certain short-term business activities can be carried out in one country before they are to be considered resident activities for the purposes of taxation.

The DTA will serve to lower withholding rates on non-portfolio dividends from the current 15 percent to 5 percent or 0 percent, depending on shareholding levels. The rate of withholding tax on royalties will be halved to a new level of 5 percent. The withholding rate on interest from banks and financial institutions will be 0 percent, compared to the current 10 percent.

Commenting on the final ascendance of the document into law, Peter Dunne, New Zealand Revenue Minister, said, “The new DTA builds on the already close economic relationship that exists between our two countries and reflects the considerable growth and change that has occurred in trade and investment between our two countries since the last agreement was signed in 1995.”

Photo by Ewan-M