The influence of alternative model tax treaties on Australian treaties

Australia draws from both the OECD Model tax treaty and the UN Model when negotiating its tax treaties. While the two Models are similar, the OECD Model tends to favour capital exporting nations by shifting more taxing rights to the country in which investors reside and the UN Model tends to favour capital importing nations by allowing source countries to retain more taxing rights. Australia is an active member of the OECD and generally its treaties follow the OECD Model. However, Australia shifts to greater reliance on the UN Model when negotiating Articles that cover the types of income generated in sectors in which Australia relies more heavily on imported capital. This paper looks at relative influence of the OECD and UN Models on four key areas of Australia s tax treaties. These are articles that cover income derived by nonresidents as business profits of a permanent establishment, capital gains from the sale of Australian assets, investment income (interest, royalties and dividends), and other income not otherwise specified in the treaties. It considers the factors that may have influenced Australia to follow one Model or the other or neither in the negotiation of these treaty measures.