Taxation Administration Amendment (Updating the List of Exchange of Information Countries) Regulations 2018

Administered by Department of the Treasury

Legislation au F2018L01596 Regulations Not in force Legislative Instrument

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EXPLANATORY STATEMENT

 

Issued by authority of the Assistant Treasurer

 

Taxation Administration Act 1953

 

Taxation Administration Amendment (Updating the List of Exchange of Information Countries) Regulations 2018

 

Section 18 of the Taxation Administration Act 1953 (the Act) provides, in part, that the Governor-General may make regulations, not inconsistent with the Act, prescribing all matters which by the Act are required or permitted to be prescribed, or which are necessary or convenient to be prescribed for giving effect to the Act.

 

The Taxation Administration Amendment (Updating the List of Exchange of Information Countries) Regulations 2018 (the Regulations) add Albania, Andorra, Austria, Azerbaijan, Bahrain, Barbados, Brazil, Brunei, Bulgaria, Cameroon, Chile, Colombia, Costa Rica, Croatia, Cyprus, Dominica, Estonia, Faroe Islands, Georgia, Ghana, Greece, Greenland, Grenada, Guatemala, Iceland, Israel, Kazakhstan, Kenya, Latvia, Liberia, Liechtenstein, Lithuania, Luxembourg, Marshall Islands, Moldova, Montserrat, Nigeria, Niue, Philippines, Portugal, Saint Lucia, Samoa, Saudi Arabia, Senegal, Seychelles, Sint Maarten, Slovenia, Switzerland, Tunisia, Turkey, Uganda, Ukraine, Uruguay and Vanuatu to the list of foreign countries and foreign territories contained in the Taxation Administration Regulations 2017 as ‘information exchange countries’ for the purposes of subsection 12-385(4) of Schedule 1 to the Act.

 

The list of foreign countries is used for calculating the amount to be withheld by the trustee of a managed investment trust (MIT) or custodian, or by another entity, from a ‘fund payment’ to a foreign resident. A 'fund payment' is, broadly, a component of a payment made by a MIT that represents a distribution of Australian source net income (other than dividends, interest and royalties) of the trust. The MIT withholding rate is the primary taxing point for passive income, such as rent, generated in a MIT.

 

The Regulations ensure that, if a fund payment is made to a tax resident of a country added by the proposed regulations as an ‘information exchange country’, the lower MIT income withholding tax rate of 15 per cent, under Subdivision 840-M of the Income Tax Assessment Act 1997, would apply to those payments. Otherwise, the fund payment is subject to the default withholding tax rate of 30 per cent.  

 

Establishing transparency and effective exchange of information (EOI) internationally is a key objective of the Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum), which is organised and supported by the Organisation for Economic Co-operation and Development’s (OECD). Australia is a member of the Global Forum and a long-standing and active supporter of international tax transparency initiatives. The OECD and Australia have been promoting tax transparency through multilateral initiatives that allow countries to transfer information easily, and by assessing jurisdictions’ adherence to global tax transparency standards and publishing those results.

 

Over the last few years, there has been an improvement in effective EOI around the world. EOI is the process by which countries share taxpayer information to help enforce their domestic tax laws. For Australia, the legal basis for EOI is provided by the EOI article of bilateral tax treaties, by a bilateral tax information exchange agreement, or through participation in the OECD’s multilateral Convention on Mutual Administrative Assistance in Tax Matters (and Amending Protocol) (the Convention). The majority of jurisdictions included in the Regulations have established effective EOI arrangements with Australia through the Convention.

 

EOI arrangements also allow the Commissioner of Taxation to obtain relevant information from those jurisdictions, for example, to verify the investor’s identity and place of residence or to support taxation compliance activities. Effective EOI requires a jurisdiction to have the legal capacity to obtain and provide information to Australia that is relevant to tax matters in Australia. Linking the eligibility for reduced withholding tax rates to EOI arrangements reinforces Australia’s international reputation for having a strong regulatory system and encourages other jurisdictions to enter into multilateral EOI arrangements, consistent with Australia’s tax transparency policy.

 

Consultation does not generally take place on updates to this list because consultation with industry and the Australian Taxation Office was undertaken in the initial development of both the legislation and the Taxation Administration Amendment Regulations 2008 (No. 2) for the list of jurisdictions that are considered to be ‘effective exchange of information countries’ in 2008. Relevant stakeholders, such as peak bodies representing MITs and payment software providers, have been made aware that the update is taking place so that they can update their payment systems by 1 January 2019. Stakeholders noted that they would have no difficulty implementing the necessary changes to their payment systems.

 

The Regulations commence on 1 January 2019.

 

A Regulation Impact Statement was not required. Compliance costs were assessed as low.

 

The Regulations apply in relation to a fund payment (within the meaning given by sections 12-405 and 12A-110 of Schedule 1 to the Act) made to a resident of a country that has been added to the Taxation Administration Regulations 2017 on or after 1 January 2019.

 


Statement of Compatibility with Human Rights

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

Taxation Administration Amendment (Updating the List of Exchange of Information Countries) Regulations 2018

 

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview of the Legislative Instrument

This Legislative Instrument amends the Taxation Administration Regulations 2017 to add the Albania, Andorra, Austria, Azerbaijan, Bahrain, Barbados, Brazil, Brunei, Bulgaria, Cameroon, Chile, Colombia, Costa Rica, Croatia, Cyprus, Dominica, Estonia, Faroe Islands, Georgia, Ghana, Greece, Greenland, Grenada, Guatemala, Iceland, Israel, Kazakhstan, Kenya, Latvia, Liberia, Liechtenstein, Lithuania, Luxembourg, Marshall Islands, Moldova, Montserrat, Nigeria, Niue, Philippines, Portugal, Samoa, Saint Lucia, Saudi Arabia, Senegal, Seychelles, Sint Maarten, Slovenia,  Switzerland, Tunisia, Turkey, Uganda, Ukraine, Uruguay and Vanuatu to the list of foreign countries and foreign territories contained in Regulation 34 that are information exchange countries for the purposes of s 12-385(4) of Schedule 1 to the Taxation Administration Act 1953. This list is relevant for calculating the amount to be withheld by the trustee of a managed investment trust or custodian, or by another entity, from a fund payment to a foreign resident.  

 

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

 

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

 

 

Overview

The Taxation Administration Amendment (Updating the List of Exchange of Information Countries) Regulations 2018 was enacted to amend the existing list of countries and territories that are recognised as information exchange countries for the purposes of the Taxation Administration Act 1953. The Regulations were made under the authority of the Assistant Treasurer and provide for the addition of several countries and territories to the list, enabling the application of a reduced withholding tax rate of 15 per cent for fund payments made to residents of these countries. The primary objective of these Regulations is to enhance the effectiveness of the exchange of information (EOI) internationally and to ensure that Australia's tax system remains aligned with global standards for tax transparency and compliance. By updating the list, the Australian Government aims to facilitate smoother and more efficient EOI arrangements, which in turn helps to maintain Australia’s reputation for a robust regulatory framework. The Regulations were not subject to a Regulatory Impact Statement and are deemed to have low compliance costs. The Regulations commenced on 1 January 2019, and a Statement of Compatibility with Human Rights was prepared in accordance with the Human Rights (Parliamentary Scrutiny) Act 2011. The Statement confirms that the Regulations do not engage any of the applicable rights or freedoms and are therefore compatible with human rights.

Scope and Application

The Taxation Administration Amendment (Updating the List of Exchange of Information Countries) Regulations 2018 amends the Taxation Administration Regulations 2017 to incorporate a new list of countries considered as 'information exchange countries' for the purposes of calculating the withholding tax rate on fund payments made by managed investment trusts (MITs) or custodians to foreign residents. These Regulations apply to fund payments made to residents of countries added to the list on or after 1 January 2019. If a fund payment is made to a tax resident of a country recognised as an 'information exchange country', the withholding tax rate on that payment is reduced to 15 per cent, provided the country has established effective exchange of information (EOI) arrangements with Australia. Otherwise, the default withholding tax rate of 30 per cent applies. This legislative change is part of Australia's broader policy to encourage international tax transparency by linking reduced withholding tax rates to jurisdictions that adhere to global EOI standards. The list of countries has been updated to reflect improvements in EOI globally, with most jurisdictions included in the Regulations having established EOI arrangements with Australia through the OECD’s Convention on Mutual Administrative Assistance in Tax Matters.

Key Provisions

The Taxation Administration Amendment (Updating the List of Exchange of Information Countries) Regulations 2018 (section 18) amend the Taxation Administration Regulations 2017 by adding several countries to the list of 'information exchange countries'. These include Albania, Andorra, Austria, Azerbaijan, Bahrain, Barbados, Brazil, Brunei, Bulgaria, Cameroon, Chile, Colombia, Costa Rica, Croatia, Cyprus, Dominica, Estonia, Faroe Islands, Georgia, Ghana, Greece, Greenland, Grenada, Guatemala, Iceland, Israel, Kazakhstan, Kenya, Latvia, Liberia, Liechtenstein, Lithuania, Luxembourg, Marshall Islands, Moldova, Montserrat, Nigeria, Niue, Philippines, Portugal, Saint Lucia, Samoa, Saudi Arabia, Senegal, Seychelles, Sint Maarten, Slovenia, Switzerland, Tunisia, Turkey, Uganda, Ukraine, Uruguay and Vanuatu (section 18). These countries are now recognised for the purposes of subsection 12-385(4) of Schedule 1 to the Taxation Administration Act 1953. This change is significant as it impacts the calculation of the amount to be withheld from 'fund payments' made to residents of these countries. A 'fund payment' is a distribution of Australian source net income of a managed investment trust (MIT), excluding dividends, interest, and royalties. The addition of these countries to the list ensures that the lower MIT income withholding tax rate of 15 per cent applies to payments made to residents of these countries, rather than the default rate of 30 per cent. The Regulations impose specific obligations on trustees of managed investment trusts, custodians, or other entities that make fund payments to foreign residents. These entities must now determine if the recipient of the fund payment is a resident of one of the newly listed countries. If so, they must apply the lower withholding tax rate of 15 per cent. This requirement necessitates that these entities update their systems and processes to accurately identify and categorise fund payments based on the residency of the recipient. This may involve updating databases, payment software, and internal procedures to ensure compliance with the new regulations. Additionally, entities must maintain records and documentation to support the withholding tax calculations for audit and compliance purposes. Failure to comply with the new withholding tax requirements may result in penalties and consequences. The primary consequence is the imposition of the default withholding tax rate of 30 per cent on fund payments made to residents of the listed countries, rather than the reduced rate of 15 per cent. This could lead to additional tax liabilities for the trustee or entity making the payment, as well as potential audits and investigations by the Australian Taxation Office (ATO). In cases of non-compliance, the ATO may impose administrative penalties, including fines, and may also seek to recover any additional taxes owed, plus interest. Additionally, persistent or egregious non-compliance could lead to more severe penalties, including criminal charges in cases of intentional or reckless disregard for tax obligations.

Legal classification tags

Area of Law
Taxation Law
Instrument
Regulation
Concepts
Definitions & Interpretation
Compliance Obligations
Reporting & Disclosure Obligations
Catchwords
Exchange of Information Countries

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.