We're a Baker Tilly network member
About Baker Tilly
Back to top
Federal Budget 2019-20: International tax
Technical article

Federal Budget 2019-20: International tax

After years of significant amendments to international tax provisions, this year’s budget is relatively quiet from an international perspective.

Access your full Federal Budget 2019-20 review here

Technical amendments to the hybrid mismatch rules

Australia has introduced hybrid mismatch provisions that generally apply to international transactions seen to provide double benefits to taxpayers, with effect for income years commencing on or after 1 January 2019.  These double benefits can include claiming deductions in two jurisdictions or claiming a deduction in one jurisdiction with no income taxed in another. The hybrid mismatch rules do not contain any exceptions for individuals or small or medium sized business and can potentially apply to almost all international tax transactions. While the provisions state they are targeted at “multinational corporations”, the provisions can potentially apply to an individual with a foreign rental property where the deductions claimed are as little as $100.

Instead of addressing the middle market’s concerns regarding the complexity and potential unintended reach of the rules, the Government has announced it will make technical corrections that will likely expand the application of the provisions. The announcements are aimed at dealing with more complex arrangements such as those involving Multiple Entry Consolidated (MEC) groups and trusts, will seek to further limit the meaning of foreign tax, and will specify that the integrity rule (targeting the use of interposed low-rate lenders) can apply where other provisions have applied.

It is disappointing that the Government has not taken the opportunity to provide a carve out for unintended impacts on the middle market, meaning businesses will incur significant compliance costs in assessing the scope of these provisions.

Australia and Israel tax treaty

Australia and Israel signed an income tax treaty on 28 March 2019, which will come into effect in Australia when the relevant approvals are obtained. Features of the treaty include reduced rates of dividend, interest and royalty withholding tax.

Given the volume of trade and investment that exist between the two jurisdictions, Australia’s 45th income tax treaty is a welcome addition to our existing tax treaty network. We believe this will further encourage significant investment in technology and start-up businesses throughout both jurisdictions.

Updating the list of information exchange countries

The Government has added eight new exchange of information agreements, increasing the number of information exchange countries from 114 to 122. Australia first entered into these agreements in 2018. The update will be effective from 1 January 2020.

The new jurisdictions are Curaçao, Lebanon, Nauru, Pakistan, Panama, Peru, Qatar and the United Arab Emirates.

From 1 January 2020, fund payments made by withholding Managed Investment Trusts (MITs) to investors in these jurisdictions should generally be eligible to access the reduced 15% MIT withholding tax rate, instead of the default rate of 30%.

This content is general commentary only and does not constitute advice. Before making any decision or taking any action in relation to the content, you should consult your professional advisor. To the maximum extent permitted by law, neither Pitcher Partners or its affiliated entities, nor any of our employees will be liable for any loss, damage, liability or claim whatsoever suffered or incurred arising directly or indirectly out of the use or reliance on the material contained in this content. Pitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Liability limited by a scheme approved under professional standards legislation.

Pitcher Partners insights

Get the latest Pitcher Partners updates direct to your inbox

Thank you for you interest

How can we help you?

Business or personal advice
General information
Career information
Media enquiries
Contact expert
Become a member
Specialist query
Please provide as much detail to ensure appropriate allocation of your query
Please highlight a realistic time frame that will enable us to provide advice within a suitable and timely manner. Please note given conflicting demands with our senior personnel, we will endeavour to respond to you within the nominated time frame. If you require an urgent response, please contact us on 03 8610 5477.
Responses to queries submitted via this form (“Response”) are produced by Pitcher Partners Advisors Proprietary Limited and are prepared for the exclusive use and benefit of those who are invited, and agree, to participate in the CRITICAL POINT NETWORK service. Responses provided, or any part thereof, must not be distributed, copied, used, or relied on by any other person, without our prior written consent. Any information provided is intended to be of a general nature and prepared without taking into account your objectives, circumstances, financial situation or particular needs. Any information provided does not constitute personal advice. If you act on anything contained in a Response without seeking personal advice you do so at your own risk. In providing this information, we are not purporting to act as solicitors or provide legal advice. Any information provided by us is prepared in the ordinary course of our profession and is based on the relevant law and its interpretations by relevant authorities as it stands at the time the information is provided. Any changes or modifications to the law and/or its interpretation after this time could affect the information we provide. It is not possible to guarantee that the tax authorities will not challenge a transaction or to guarantee the outcome of such a challenge if one is raised on the basis of the information we provide. To the maximum extent permitted by law, Pitcher Partners will not be liable for any loss, damage, liability or claim whatsoever suffered or incurred by any person arising directly or indirectly out of the use or reliance on the information contained within a Response. We recommend you seek a formal engagement of our professional services to consider the appropriateness of the information in a Response having regard to your objectives, circumstances, financial situation or needs before proceeding with any financial decisions. Pitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Liability limited by a scheme approved under professional standards legislation.
CPN Enquiry
Business Radar 2025
Dealmakers 2025
Federal Budget 2025-26
Search by industry