Treasury Laws Amendment (Australia‑India Economic Cooperation and Trade Agreement Implementation) Act 2022
No. 60, 2022
An Act to amend the law relating to taxation, and for related purposes
Contents
1 Short title
2 Commencement
3 Schedules
Schedule 1—Adjustment to tax on certain payments or credits made to Indian residents
International Tax Agreements Act 1953
Treasury Laws Amendment (Australia-India Economic Cooperation and Trade Agreement Implementation) Act 2022
No. 60, 2022
An Act to amend the law relating to taxation, and for related purposes
[Assented to 23 November 2022]
The Parliament of Australia enacts:
1 Short title
This Act is the Treasury Laws Amendment (Australia‑India Economic Cooperation and Trade Agreement Implementation) Act 2022.
2 Commencement
(1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.
Commencement information |
Column 1 | Column 2 | Column 3 |
Provisions | Commencement | Date/Details |
1. Sections 1 to 3 and anything in this Act not elsewhere covered by this table | The day this Act receives the Royal Assent. | 23 November 2022 |
2. Schedule 1 | The later of: (a) the day this Act receives the Royal Assent; and (b) the day the Australia‑India Economic Cooperation and Trade Agreement, done at Melbourne and New Delhi on 2 April 2022, enters into force for Australia. However, the provisions do not commence at all if the event mentioned in paragraph (b) does not occur. The Minister must announce, by notifiable instrument, the day the Agreement enters into force for Australia. | 29 December 2022 (paragraph (b) applies) (F2022N00329) |
Note: This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act.
(2) Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act.
3 Schedules
Legislation that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.
Schedule 1—Adjustment to tax on certain payments or credits made to Indian residents
International Tax Agreements Act 1953
1 Subsection 5(1) (table item dealing with the Indian agreement)
Omit “nil”, substitute “section 11J”.
2 Subsection 5(1) (table item dealing with the Indian protocol (No. 1))
Omit “nil”, substitute “section 11J”.
3 After section 11H
Insert:
11J Agreement with India
The Indian agreement (as amended by the Indian protocol (No. 1)) does not have the effect of subjecting to Australian tax any payments or credits, whether periodical or not, and however described or computed, to the extent to which they:
(a) are made as consideration for the rendering of any services covered by paragraph 12(3)(g) of that agreement (as amended); and
(b) are not royalties (within the meaning of the Income Tax Assessment Act 1936); and
(c) would, apart from paragraph 12(3)(g) and Article 23 of that agreement (as amended), not be subject to Australian tax.
Note: This section does not prevent payments or credits from being subjected to Australian tax because of another provision of that agreement. For example, because of Articles 7 and 23 of that agreement.
4 Application of amendments
The amendments made by this Schedule apply in relation to assessments for years of income starting on or after the commencement of this Schedule.
[Minister’s second reading speech made in—
House of Representatives on 28 September 2022
Senate on 21 November 2022]
Overview
The Treasury Laws Amendment (Australia-India Economic Cooperation and Trade Agreement Implementation) Act 2022 was enacted by the Parliament of Australia to facilitate the implementation of the Australia-India Economic Cooperation and Trade Agreement, which was signed in April 2022. This Act aims to amend existing tax laws to ensure they align with the provisions of the trade agreement, particularly concerning the taxation of certain payments and credits made to Indian residents. The policy objective of the Act is to provide clarity and legal certainty regarding the tax treatment of payments and credits, ensuring that they are not subject to Australian tax under specific conditions outlined in the agreement, while maintaining the integrity of other provisions that may still apply.
The Act specifies that certain payments or credits made to Indian residents will not be subject to Australian tax if they are made as consideration for services covered under the trade agreement and do not qualify as royalties. This amendment applies to assessments for years of income starting on or after the commencement of the Act. The commencement of the Act is contingent upon the Australia-India Economic Cooperation and Trade Agreement entering into force for Australia, with the relevant provisions of the Act taking effect either on the date of Royal Assent or the date the agreement comes into force, whichever is later. However, if the agreement does not enter into force, the provisions related to tax adjustments will not commence at all.
Scope and Application
The Treasury Laws Amendment (Australia-India Economic Cooperation and Trade Agreement Implementation) Act 2022 is an Australian legislative instrument designed to modify the taxation laws of Australia to align with the provisions of the Australia-India Economic Cooperation and Trade Agreement. This Act applies to the taxation of payments and credits made to Indian residents, ensuring that these are not subject to Australian tax under specific circumstances as outlined in the amended International Tax Agreements Act 1953. The Act's primary focus is on preventing double taxation in respect of services covered by the agreement, excluding royalties and other payments not explicitly covered by the agreement. The Act's provisions commence upon Royal Assent on 23 November 2022, with specific adjustments to tax treatments taking effect from the later of Royal Assent or the Agreement's entry into force for Australia, contingent on the Minister announcing the Agreement's effective date. The Act applies nationally, impacting entities and individuals involved in cross-border services between Australia and India, subject to the terms of the agreement and its amendments.
Key Provisions
The Treasury Laws Amendment (Australia-India Economic Cooperation and Trade Agreement Implementation) Act 2022 is designed to implement the Australia-India Economic Cooperation and Trade Agreement by adjusting certain tax provisions under the International Tax Agreements Act 1953. The Act modifies the tax treatment of payments and credits made to Indian residents by exempting them from Australian tax under specific conditions. Specifically, Section 11J of the Act states that payments or credits made as consideration for services covered by paragraph 12(3)(g) of the India agreement (as amended by the Indian protocol (No. 1)) are not subject to Australian tax, provided they are not royalties and would not otherwise be taxable in Australia. This amendment applies to assessments for years of income starting on or after the commencement of the Act's Schedule 1.
Entities and individuals affected by these provisions must ensure compliance by understanding the specific conditions under which payments or credits to Indian residents are exempt from Australian tax. This involves verifying that the payments or credits fall under the specified conditions outlined in Section 11J, such as being made for services covered by the agreement and not being royalties. Additionally, they must be aware of the commencement date of these provisions, which is the later of the Act's assent date and the entry into force of the Australia-India Economic Cooperation and Trade Agreement. The Minister’s announcement of the Agreement’s entry into force is a critical date for determining when these tax adjustments become effective.
Breaching the provisions of this Act can lead to significant consequences. The Act does not explicitly state penalties for non-compliance, but failing to adhere to the tax adjustments could result in the imposition of tax on payments or credits that should otherwise be exempt. This could lead to financial penalties and interest charges for underpaid taxes. Additionally, ongoing non-compliance might attract the attention of the Australian Taxation Office, potentially resulting in audits and further financial liabilities. Therefore, entities and individuals must ensure they understand and correctly apply the tax exemptions as stipulated by Section 11J to avoid any inadvertent breaches.