Australia’s unique combination of economic and political attributes has clearly had an impact on its tax treaty policy. The country has been an OECD member for over half a century and has consistently supported OECD-promoted policies. It is, at the same time, relatively sparsely populated when viewed in terms of its physical size and abundance of natural resources, leaving it reliant on foreign capital for a significant portion of its resource exploitation enterprises. It is simultaneously both a capital exporter in terms of passive portfolio investment and a very serious capital importer in terms of direct non-portfolio active investment. The country’s tax treaty policy reflects the dichotomous policy interests, with early adoption of the United Nations (UN) Model policies on taxing rights over gains from the disposal of indirect interests in immovable property. At the same time, it veers towards OECD norms in terms of passive investment income. Particularly striking is its treatment of direct non-portfolio active investment where it has used a combination of more generous features from the OECD and UN Model treaties on top of generous domestic law exemptions to create a very favourable regime for remittances of profits from active subsidiaries in Australia.
Intertax