Premier of Queensland

For reply please quote : IGR/GC - TF/10/8403 - DOC/10/41305

. 2 7 APR 7090

Mr Neil LaurieClerk of the ParliamentParliament HouseGeorge StreetBRISBANE QLD 4000

Executive Buildingioo George Street Brisbane

PO Box 15185 City EastQueensland 4002 Australia

Telephone +617 32244500Facsimile +61732213631Email ThePrernier@premiers.q[d.gov.auWebsite www.thepremier.qld.gov.au

In accordance with parliamentary procedures, I wish to table correspondence from theFederal Parliament 's Joint Standing Committee on Treaties (JSCOT) in the Legislative

Assembly.

The attached material for tabling includes:

• a copy of the letter from the Chair of JSCOT regarding the five proposedinternational treaty actions tabled in both houses of Federal Parliament on29 March 2010; and

• National Interest Analyses for the proposed treaty actions listed in the letter.

Thank you for your assistance in arranging the tabling of this material as soon aspossible.

Yours sincerely

ANNA BLIGH MPPREMIER OF QUEENSLAID

^Pueenslandv rnment

JOINT STANDING COMMITTEE ON TREATIESParliament House, Canberra ACT 2600 I Phone: (02) 6277 4002 ( Fax: (02) 6277 2219 1 Email: jsct@aph.gov.au

30 March 2010.

The Hon Anna Bligh MPPremier of QueenslandParliament HouseBRISBANE QLD 4002

Dear Premier

Treaties tabled on 29 March 2010

I am writing to advise of the most recent tabling of treaties, and to invite commentsas part of the review process undertaken by the Commonwealth Parliament's JointStanding Committee on Treaties.

Before action is taken to bind Australia to the terms of treaties, the TreatiesCommittee considers and reports on whether the proposals are in Australia'snational interest. The Committee is currently inquiring into the following proposedtreaties tabled in both Houses of the Parliament this week:

Treaties tabled on 29 March 2010

Agreement between the Government ofAustralia and the Government of the CookIslands on the Exchange of Information with Respect to Taxes (Rarotonga, 27October 2009)

a Agreement between the Government ofAustralia and the Government of the CookIslands on the Allocation of Taxing Rights with Respect to Certain Income ofIndividuals and to Establish a Mutual Agreement Procedure in Respect ofTransfer Pricing Adjustments (Rarotonga, 27 October 2009)

Agreement between the Government ofAustralia and the Government of Gibraltaron the Exchange of Information with Respect to Taxes (London, 25 August 2009)

Agreement between the Government ofAustralia and the States of Guernsey forthe Exchange of Information Relating to Tax Matters (London, 7 October 2009)

Agreement between the Government ofAustralia and the States of Guernsey forthe Allocation of Taxing Rights with Respect to Certain Income of Individuals andto Establish a Mutual Agreement Procedure in Respect of Transfer PricingAdjustments (London, 7 October 2009)

The subject matter of international treaties can be of interest to State and TerritoryGovernments and Parliaments and we are keen to provide an opportunity forcomment on any issues arising from proposed treaties. Treaty texts and copies of the

National Interest Analysis (which accompany each treaty tabled) are available fromthe Committee's website athtt / 1 ^y ti .s111. 7c, 5 . o Jhc^ttsc? committee/ ° ct 29n arc 01 t^^f.(lt n.

As the Treaties Committee has periods of 15 and 20 sitting days in which to completeits reviews, it would be helpful if you could forward any comments you might wishto make to the Committee Secretariat by Friday, 30 April 2010. If substantial issuesof concern are raised about any of the proposed treaties and the Committee's usualperiod of review is extended, it may be possible to arrange for a submission to belodged after this date. Your comments may be accepted as a submission to thereview and authorised for publication.

Should your officials have any questions about the treaties or about our reviewprocedures, they should contact Jerome Brown, A/g Committee Secretary ontelephone (02) 6277 4002, facsimile (02) 6277 2219 or e-mail jsct@aph.gov.au.

Yours faithfully

Kelvin Thomson MPChair

DEPARTMENT OF FOREIGN AFFAIRS AND TRADE

CANBERRA

AGREEMENT BETWEEN

THE GOVERNMENT OF AUSTRALIA

AND

THE GOVERNMENT OF THE COOK ISLANDS

ON

THE EXCHANGE OF INFORMATION WITH RESPECT TO TAXES

(Rarotonga, 27 October 2009)

Not yet in force

[2009) ATNIF 30

The Government of Australia and the Government of the Cook Islands,

Desiring to facilitate the exchange of information with respect to taxes,

Have agreed as follows:

ARTICLE 1

OBJECT AND SCOPE OF THIS AGREEMENT

The competent authorities of the Contracting Parties shall provide assistance through

exchange of information that is foreseeably relevant to the administration and enforcement of the

domestic laws of those Parties concerning taxes covered by this Agreement. Such information shall

include information that is foreseeably relevant to the determination, assessment and collection of

such taxes, the recovery and enforcement of tax claims, or the investigation or prosecution of tax

matters. Information shall be exchanged in accordance with the provisions of this Agreement and

shall be treated as confidential in the manner provided in Article 8. The rights and safeguards

secured to persons by the laws or administrative practice of the Requested Party remain applicable.

The Requested Party shall use its best endeavours to ensure that any such rights and safeguards are

not applied in a manner that unduly prevents or delays effective exchange of information.

ARTICLE 2

JURISDICTION

A Requested Party is not obligated to provide information which is neither held by its

authorities nor in the possession or control of persons who are within its territorial jurisdiction.

ARTICLE 3

TAXES COVERED

1. The existing taxes which are the subject of this Agreement are:

(a) in Australia, taxes of every kind and description imposed under federal laws

administered by the Commissioner of Taxation; and

(b) in the case of the Cook Islands, taxes of every kind and description.

2. This Agreement shall also apply to any identical or substantially similar taxes imposed after

the date of signature of this Agreement in addition to, or in place of, the existing taxes. The

Agreement shall also apply to such other taxes as may be agreed in an exchange of letters between

the Contracting Parties. The competent authorities of the Contracting Parties shall notify each other

of any substantial changes to the taxation and related information gathering measures covered by

this Agreement.

3. This Agreement shall not apply to taxes imposed by states, municipalities, or other political

subdivisions, or possessions of a Contracting Party.

ARTICLE 4

DEFINITIONS

1. For the purposes of this Agreement, unless otherwise defined:

(a) the term "Applicant Party" means the Contracting Party requesting information;

(b) the term "Australia", when used in a geographical sense, excludes all external territories other

than:

(i) the Territory of Norfolk Island;

(ii) the Territory of Christmas Island;

(iii) the Territory of Cocos (Keeling) Islands;

(iv) the Territory of Ashmore and Cartier Islands;

(v) the Territory of Heard Island and McDonald Islands; and

(vi) the Coral Sea Islands Territory,

and includes any area adjacent to the territorial limits of Australia (including the

Territories specified in this subparagraph) in respect of which there is for the time being

in force, consistently with international law, a law of Australia dealing with the

exploration for or exploitation of any of the natural resources of the exclusive economic

zone or the seabed and subsoil of the continental shelf;

(c) the term "the Cook Islands" means the territory of the Cook Islands;

(d) the term "collective investment fund or scheme " means any pooled investment vehicle,

irrespective of legal form. The term "public collective investment fund or scheme"

means any collective investment fund or scheme provided the units , shares or other

interests in the fund or scheme can be readily purchased , sold or redeemed by the

public. Units , shares or other interests in the fund or scheme can be readily purchased,

sold or redeemed "by the public " if the purchase , sale or redemption is not implicitly or

explicitly restricted to a limited group of investors;

(e) the term "company" means any body corporate or any entity that is treated as a body

corporate for tax purposes;

(f) the term "competent authority" means in the case of Australia , the Commissioner of

Taxation or an authorised representative of the Commissioner and, in the case of the

Cook Islands, the Collector of Inland Revenue or an authorised representative of the

Collector;

(g) the term "Contracting Party" means Australia or the Cook Islands as the context

requires;

(h) the term "criminal laws" means all criminal laws designated as such under domestic law

irrespective of whether contained in the tax laws, the criminal code or other statutes;

(i) the term " criminal tax matters" means tax matters involving intentional conduct which

is liable to prosecution under the criminal laws of the Applicant Party;

G) the term "information" means any fact, statement or record in any form whatever;

(k) the term "information gathering measures" means laws and administrative or judicial

procedures that enable a Contracting Party to obtain and provide the requested

information;

(1)

(m)

the term "person" includes an individual, a company and any other body of persons;

the term "principal class of shares" means the class or classes of shares representing a

majority of the voting power and value of the company;

(n) the term "publicly traded company" means any company whose principal class of shares

is listed on a recognised stock exchange provided its listed shares can be readily

purchased or sold by the public. Shares can be purchased or sold "by the public" if the

purchase or sale of shares is not implicitly or explicitly restricted to a limited group of

investors;

(o) the term "recognised stock exchange" means any stock exchange agreed upon by the

competent authorities of the Contracting Parties;

(p) the term "Requested Party" means the Contracting Party requested to provide

information; and

(q) the term "tax" means any tax to which this Agreement applies pursuant to Article 3.

2. As regards the application of this Agreement at any time by a Contracting Party, any term not

defined therein shall, unless the context otherwise requires, have the meaning that it has at that time

under the law of that Party, any meaning under the applicable tax laws of that Party prevailing over

a meaning given to the term under other laws of that Party.

ARTICLE 5

EXCHANGE OF INFORMATION UPON REQUEST

1. The competent authority of the Requested Party shall provide upon request information for

the purposes referred to in Article 1. Such information shall be exchanged without regard to

whether the conduct being investigated would constitute a crime under the laws of the Requested

Party if such conduct occurred in the Requested Party.

2. If the information in the possession of the competent authority of the Requested Party is not

sufficient to enable it to comply with the request for information, that Party shall use all relevant

information gathering measures to provide the Applicant Party with the information requested,

notwithstanding that the Requested Party may not need such information for its own tax purposes.

3. If specifically requested by the competent authority of an Applicant Party, the competent

authority of the Requested Party shall provide information under this Article, to the extent

allowable under its domestic laws, in the form of depositions of witnesses and authenticated copies

of original records.

4. Each Contracting Party where it is satisfied there is cause for enquiry shall ensure that its

competent authority for the purposes specified in Article 1 of this Agreement, has the authority to

obtain and provide upon request:

(a) information held by banks, other financial institutions, and any person acting in an

agency or fiduciary capacity including nominees and trustees;

(b) information regarding the ownership of companies, partnerships, trusts, foundations,

"Anstalten" and other persons, including, within the constraints of Article 2, ownership

information on all such persons in an ownership chain; in the case of trusts, information

on settlors, trustees, beneficiaries and protectors; and in the case of foundations,

information on founders, members of the foundation council and beneficiaries. Further,

this Agreement does not create an obligation on the Contracting Parties to obtain or

provide ownership information with respect to publicly traded companies or public

collective investment funds or schemes unless such information can be obtained without

giving rise to disproportionate difficulties.

5. The competent authority of the Applicant Party shall provide the following information to the

competent authority of the Requested Party when making a request for information under this

Agreement to demonstrate the foreseeable relevance of the information to the request:

(a) the identity of the person under examination or investigation;

(b) a statement of the information sought including its nature and the form in which the

Applicant Party wishes to receive the information from the Requested Party;

(c) the tax purpose for which the information is sought;

(d) the grounds for believing that the information requested is held in the Requested Party

or is in the possession or control of a person within the jurisdiction of the Requested

Party and is foreseeably relevant to the tax purpose of the request;

(e) to the extent known, the name and address of any person believed to be in possession of

the requested information;

(t)

(g)

a statement that the request is in conformity with the law and administrative practices of

the Applicant Parry, that if the requested information was within the jurisdiction of the

Applicant Party then the competent authority of the Applicant Party would be able to

obtain the information under the laws of the Applicant Party or in the normal course of

administrative practice and that the information request is in conformity with this

Agreement; and

a statement that the Applicant Party has pursued all means available in its own territory

to obtain the information, except those that would give rise to disproportionate

difficulties.

6. The competent authority of the Requested Party shall forward the requested information as

promptly as possible to the Applicant Party. To ensure a prompt response, the competent authority

of the Requested Party shall:

(a) confirm receipt of a request in writing to the competent authority of the Applicant Party

and shall notify the competent authority of the Applicant Party of deficiencies in the

request, if any, within 60 days of the receipt of the request; and

(b) if the competent authority of the Requested Party has been unable to obtain and provide

the information within 90 days of receipt of the request, including if it encounters

obstacles in furnishing the information or it refuses to furnish the information, it shall

immediately inform the Applicant Party, explaining the reason for its inability, the

nature of the obstacles or the reasons for its refusal.

ARTICLE 6

TAX EXAMINATIONS ABROAD

1. A Contracting Party may allow representatives of the competent authority of the other

Contracting Party to enter the territory of the first-mentioned Party to interview individuals and

examine records with the written consent of the persons concerned. The competent authority of the

second-mentioned Party shall notify the competent authority of the first-mentioned Party of the time

and place of the meeting with the individuals concerned.

2. At the request of the competent authority of one of the Contracting Parties, the competent

authority of the other Contracting Party may allow representatives of the competent authority of the

first-mentioned Party to be present at the appropriate part of a tax examination in the second-

mentioned Party.

3. If the request referred to in paragraph 2 is acceded to, the competent authority of the

Contracting Party conducting the examination shall, as soon as possible, notify the competent

authority of the other Party about the time and place of the examination, the authority or official

designated to carry out the examination and the procedures and conditions required by the first-

mentioned Party for the conduct of the examination. All decisions with respect to the conduct of

the tax examination shall be made by the Party conducting the examination.

ARTICLE 7

POSSIBILITY OF DECLINING A REQUEST

1. The Requested Party shall not be required to obtain or provide information that the Applicant

Party would not be able to obtain under its own laws for purposes of the administration or

enforcement of its own tax laws. The competent authority of the Requested Party may decline to

assist where the request is not made in conformity with this Agreement.

2. The provisions of this Agreement shall not impose on a Contracting Party the obligation to

supply information which would disclose any trade , business , industrial , commercial or professional

secret or trade process . Notwithstanding the foregoing , information of the type referred to in

paragraph 4 of Article 5 shall not be treated as such a secret or trade process merely because it

meets the criteria in that paragraph.

3. The provisions of this Agreement shall not impose on a Contracting Party the obligation to

obtain or provide information, which would reveal confidential communications between a client

and an attorney, solicitor or other admitted legal representative where such communications are:

(a) produced for the purposes of seeking or providing legal advice; or

(b) produced for the purposes of use in existing or contemplated legal proceedings.

4. The Requested Party may decline a request for information if the disclosure of the

information would be contrary to public policy (ordre public).

5. A request for information shall not be refused on the ground that the tax claim giving rise to

the request is disputed by the taxpayer.

6. The Requested Party may decline a request for information if the information is requested by

the Applicant Party to administer or enforce a provision of the tax law of the Applicant Party, or

any requirement connected therewith, which discriminates against a national of the Requested Party

as compared with a national of the Applicant Party in the same circumstances.

ARTICLE 8

CONFIDENTIALITY

Any information received by a Contracting Party under this Agreement shall be treated as

confidential and may be disclosed only to persons or authorities (including courts and

administrative bodies) in the jurisdiction of the Contracting Party concerned with the assessment or

collection of, the enforcement or prosecution in respect of, or the determination of appeals in

relation to, the taxes covered by this Agreement. Such persons or authorities shall use such

information only for such purposes. They may disclose the information in public court proceedings

or in judicial decisions. The information may not be disclosed to any other person or entity or

authority or any other jurisdiction without the express written consent of the competent authority of

the Requested Party.

ARTICLE 9

COSTS

Unless the competent authorities of the Contracting Parties otherwise agree, ordinary costs

incurred in providing assistance shall be borne by the Requested Party, and extraordinary costs

incurred in providing assistance (including reasonable costs of engaging external advisors in

connection with litigation or otherwise) shall be borne by the Applicant Party. At the request of

either Contracting Party, the competent authorities shall consult as necessary with regard to this

Article, and in particular the competent authority of the Requested Party shall consult with the

competent authority of the Applicant Party in advance if the costs of providing information with

respect to a specific request are expected to be significant.

ARTICLE 10

IMPLEMENTATION LEGISLATION

The Contracting Parties shall enact any legislation necessary to comply with, and give effect

to, the terms of this Agreement.

ARTICLE 11

NO PREJUDICIAL OR RESTRICTIVE MEASURES

1. Neither of the Contracting Parties shall apply prejudicial or restrictive measures based on

harmful tax practices to residents or nationals of either Contracting Party so long as this Agreement

is in force and effective.

2. A "prejudicial or restrictive measure based on harmful tax practices" is a measure applied by

one Contracting Party to residents or nationals of either Contracting Party on the basis that the other

Contracting Party does not engage in effective exchange of information and/or because it lacks

transparency in the operation of its laws, regulations or administrative practices, or on the basis of

no or nominal taxes and one of the preceding criteria.

3. Without limiting the generality of paragraph 2, the term "prejudicial or restrictive measure"

includes the denial of a deduction, credit or exemption, the imposition of a tax, charge or levy, or

special reporting requirements.

4 A "prejudicial or restrictive measure" does not include generally applicable measures, applied

by either Contracting Party, such as Controlled Foreign Company rules, Foreign Investment Fund

rules, Transfer Pricing rules, Thin Capitalisation rules, Transferor Trust rules, the operation of dual

exempt and foreign tax credit systems or general information reporting rules that relate to the

disclosure of information from other countries or jurisdictions, or transactions with such countries

or jurisdictions, such as record keeping requirements imposed on foreign owned subsidiaries to

ensure access to information concerning parent companies.

ARTICLE 12

MUTUAL AGREEMENT PROCEDURE

1. The competent authorities of the Contracting Parties shall jointly endeavour to resolve any

difficulties or doubts arising as to the interpretation or application of this Agreement.

2. In addition to the endeavours referred to in paragraph 1, the competent authorities of the

Contracting Parties may mutually determine the procedures to be used under Articles 5 and 6.

3. The competent authorities of the Contracting Parties may communicate with each other

directly for the purposes of this Article.

4. The Contracting Parties may also decide upon other forms of dispute resolution.

ARTICLE 13

ENTRY INTO FORCE

The Government of Australia and the Government of the Cook Islands shall notify each other in

writing through the diplomatic channel of the completion of their constitutional and legal

procedures for the entry into force of this Agreement. This Agreement shall enter into force on the

date of the last notification, and shall thereupon have effect:

(a) for criminal tax matters from 1 July 2010; and

(b) for all other matters covered in Article 1 from 1 July 2010, but only in respect of taxable

periods beginning on or after that date or, where there is no taxable period, all charges to tax

arising on or after that date.

ARTICLE 14

TERMINATION

1. This Agreement shall continue in effect indefinitely, but either of the Contracting Parties may,

after the expiration of one year from the date of its entry into force, give to the other Contracting

Party through the diplomatic channel written notice of termination.

2. Such termination shall become effective on the first day of the month following the expiration

of a period of 6 months after the date of receipt of notice of termination by the other Contracting

Party.

3. Notwithstanding any termination of this Agreement, the Contracting Parties shall remain

bound by the provisions of Article 8 with respect to any information obtained under this Agreement.

IN WITNESS WHEREOF the undersigned, duly authorised thereto by their respective

Governments, have signed this Agreement.

DONE at Rarotonga on this twenty seventh day of October 2009,

in duplicate.

FOR THE GOVERNMENT OF FOR THE GOVERNMENT OF THEAUSTRALIA: COOK ISLANDS:

Senator Nick Sherry Sir Terepai MaoateAssistant Treasurer Prime Minister

DOCUMENTS TO BE TABLED ON 29 MARCH 2010:

® National Interest Analysis [2010 1 ATNIA 9

with attachment on consultation

® Agreement between the Government of Australia and theGovernment of The Cook Islands on the Exchange of Informationwith Respect to Taxes,done at Rarotonga on 27 October 2009

[20091 ATNIF 30

NATIONAL INTEREST ANALYSIS: CATEGORY 2 TREATY

SUMMARY PAGE

Agreement between the Government of Australia and the Government ofthe Cook Islands on the Exchange of Information with Respect to Taxes,

done at Rarotonga on 27 October 2009[2009] ATNIF 30

Nature and timing of proposed treaty action

1. The proposed treaty action is to bring the Agreement between the Government of Australiaand the Government of the Cook Islands on the Exchange of Information with Respect to Taxes (theAgreement) into force. Pursuant to Article 13, the Agreement will enter into force on the date ofthe completion of an exchange of notifications between Australia and the Cook Islands establishingthat the necessary domestic procedures for entry into force have been completed.

2. The Agreement will then have effect:

a) from 1 July 2010 with respect to criminal tax matters; andb) from 1 July 2010 with respect to civil tax matters, but only relating to taxable periods

beginning on or after that date or, where there is no taxable, period, charges to tax arising onor after that date.

Overview and national interest summary

3. The key objective of the Agreement , commonly referred to as a Tax Information ExchangeAgreement (TIEA), is to establish a legal basis for the exchange of tax information relating tocertain persons between the Governments of Australia and the Cook Islands.

4. The Cook Islands is a self-governing parliamentary democracy in free association with NewZealand. The Cook Islands is fully responsible for internal affairs but New Zealand retainsresponsibility for external affairs and defence, in consultation with the Cook Islands. It has a low-tax structure and operates an offshore financial centre.

5. Detailed information on the level and type of economic activity between Australia and theCook Islands is not available. However, as discussed in paragraph 12, available data indicates asignificant amount of funds flows between Australia and the Cook Islands.

6. The Agreement will help Australia protect its revenue base by allowing the Commissionerof Taxation to request and receive certain information held in the Cook Islands, and will helpimprove the integrity of the tax system by discouraging tax evasion by individuals and businesses.The Agreement also incorporates a number of important safeguards to protect the legitimateinterests of taxpayers, including requirements in relation to confidentiality and legal privilege.

7. Australia has signed 13 TIEAs, five of which have entered into force (Antigua and Barbuda,Bermuda, Isle of Man, Jersey and Netherlands Antilles) and eight of which have yet to enter intoforce (Aruba, British Virgin Islands, the Cook Islands, Guernsey, Gibraltar, Samoa, San Marino andSt Kitts and Nevis). The Agreement with the Cook Islands is a part of Australia's efforts toconclude TIEAs with jurisdictions that have committed to work with Organisation for EconomicCooperation and Development (OECD) member countries to improve transparency and establisheffective procedures for the exchange of tax information.

Reasons for Australia to take the proposed treaty action

8. The Agreement, alongside TIEAs with other countries, is an important tool in Australia'sefforts to combat offshore tax evasion. The Agreement provides for the effective exchange ofinformation between Australia and the Cook Islands, which will promote fairness and enhanceAustralia's ability to administer and enforce its domestic tax laws.

9. The Agreement is part of Australia's ongoing commitment to the OECD's work oneliminating harmful tax practices that contribute to international tax avoidance and evasion.Australia has taken a leadership role in this work and is currently the Chair of the Global Forum onTransparency and Exchange of Information for Tax Purposes, which has a membership of more

than 70 countries.

10. Since 2002, more than 40 low-tax jurisdictions, including the Cook Islands, have publiclycommitted to the implementation of OECD standards of transparency and information exchange fortax purposes, which have been endorsed by both the United Nations and the G-20. These standards,when implemented, ensure the availability of information needed by tax authorities to determine ataxpayer's correct tax liability. TIEAs are the key bilateral means that facilitate the provision of

such information by low-tax jurisdictions.

11. In April 2002, the OECD released a model TIEA to facilitate negotiations between OECDmember countries and committed jurisdictions. In October 2003, the then Australian Treasurerapproved an Australian model TIEA which is closely aligned to the OECD model. The Agreementwith the Cook Islands essentially follows the format of the Australian model TIEA.

12. Data held by the Australian Transaction Reports and Analysis Centre (AUSTRAC) indicatesa significant flow of funds between Australia and the Cook Islands. While most financial flows to

and from low-tax jurisdictions are legitimate, the legal frameworks and systems that make low-taxjurisdictions attractive for legitimate purposes may also be used in arrangements designed to evadepaying tax elsewhere. In particular, the use of secrecy laws to conceal assets and income that are

subject to Australian tax is of concern to Australia.

13. It is in Australia's interest to develop a network of TIEAs with low-tax jurisdictions. TheAgreement, along with existing and future TIEAs, will make it harder for taxpayers to avoid orevade Australian tax and discourage those taxpayers from participating in illegitimate taxarrangements by increasing the probability of detection. This will help Australia protect its revenuebase and improve the integrity of the tax system while enhancing the Cook Islands' reputation as a

location for legitimate business activity.

14. The Cook Islands' commitment to implement the Agreement is a positive step in itsrelationship with Australia. The OECD has identified the Cook Islands as a jurisdiction that hascommitted to the internationally agreed tax standard (on the exchange of information) but has not

yet substantially implemented the standard.

Obligations

15. Article 5(1) of the Agreement obliges the competent authorities of the Parties to provide, onrequest, information that is foreseeably relevant to the administration and enforcement of theParties' domestic tax laws, including the collection of taxes and the investigation or prosecution of

tax matters. A request for information must be in writing and contain the details required by Article

5(5). This obligation applies irrespective of whether the conduct being investigated wouldconstitute a crime under the domestic law of the requested Party if it occurred in the territory of that

Party.

16. Article 5(2) provides that where the information in the possession of the requested Party isinsufficient to enable compliance with a request, the requested Party must use its informationgathering powers to obtain and provide the information, even if it is not needed for the requestedParty's domestic tax purposes. This is consistent with Article 26 (Exchange of Information) of theOECD Model Convention with Respect to Taxes on Income and on Capital, which has beenincorporated into Australia's tax treaty policy.

17. Article 5(4) obliges the Parties to ensure their competent authority has the authority toobtain and provide information held by banks, other financial institutions and any person acting inan agency or fiduciary capacity, as well as information regarding the legal and beneficial ownershipof companies and partnerships and certain persons involved with trusts and foundations. TheCommissioner of Taxation currently has the necessary legal authority to meet Australia'sobligations under Article 5(4).

18 Article 5(6) obliges the Parties to acknowledge receipt of requests for information and toprovide the requested information as promptly as possible.

19. Article 6 provides that one Party may, on request, permit interviews with individuals and theexamination of records within its jurisdiction by officials of the other Party, with the written consentof the persons concerned.

20. Article 7 provides various grounds for the refusal of requests, including where requests arenot in conformity with the Agreement or if the requesting Party would be unable to obtain therequested information under its own laws.

21. Article 8 obliges the Parties to keep information received confidential. Such informationmay be disclosed only to persons or authorities concerned with the administration or enforcement oftaxation covered by the Agreement and may only be used for such purposes, although this mayinclude public court proceedings or in judicial decisions. The express written consent of thecompetent authority of the requested Party is required for the disclosure of the requestedinformation to any other person, entity, authority or jurisdiction.

22. Article 9 obliges the requested Party to bear ordinary costs associated with responding torequests for information, while extraordinary costs are to be borne by the requesting Party, unlessthe Parties otherwise agree. Paragraph 29 outlines the financial impact of these obligations.

23. Article 11 obliges each Party to refrain from imposing prejudicial or restrictive measures onresidents or nationals of the other Party on the basis that the other Party does not engage ineffective exchange of information and/or because it lacks transparency in the operation of its laws,regulations or administrative practices. A prejudicial or restrictive measure includes the denial of adeduction, credit or exemption, the imposition of a tax, or special reporting requirements.

24. Article 12 requires the Parties to jointly endeavour to resolve difficulties or doubtsconcerning the application or interpretation of the Agreement, and provides that they may alsodecide upon other forms of dispute resolution.

Implementation

25. Australia is able to fulfil its obligations under the Agreement under existing legislation,specifically section 23 of the International Tax Agreements Act 1953. No further legislation orregulation is required in order to implement the Agreement.

26. The implementation of the Agreement will not affect the existing roles of theCommonwealth or the States and Territories in tax matters.

Costs

27. The Agreement will have a small administrative and financial impact on the AustralianTaxation Office (ATO). As the Cook Islands is unlikely to routinely need Australian informationfor its own tax purposes, it is likely that most requests for information will originate from Australia.Some additional resources may be required so that the ATO may provide technical assistance to theCook Islands in relation to its exchange of information procedures, if necessary.

28. The ATO and the Collector of Inland Revenue of the Cook Islands will conclude aMemorandum of Understanding, under which certain costs associated with Australian requests forinformation will be borne by the ATO. Examples of such costs, classified as extraordinary costs,include:

a) reasonable fees charged by third parties for carrying out research;

b) reasonable fees charged by third parties for copying documents;

c) reasonable costs of engaging experts, interpreters or translators;

d) reasonable costs of conveying documents to Australia;

e) reasonable litigation costs of the Cook Islands; andf) reasonable costs of obtaining depositions or testimony.

29. Australian residents are unlikely to incur significant compliance costs in relation to theAgreement. It is unlikely Australia will receive many requests for information from the CookIslands and therefore be required to collect information from Australian residents.

30. Overall, it is estimated that the administrative and financial impact of the Agreement will beabsorbed by the ATO's existing exchange of information programme, which currently administerssimilar arrangements with more than 40 countries. On a broader level, as the Agreement is intendedto help reduce tax avoidance and evasion by Australian taxpayers, its general impact could result in

the positive generation of revenue for Australia.

Regulation Impact Statement

31. The Treasury has assessed the implementation of the Agreement against criteria in the Best

Practice Regulation Handbook and concluded that this regulatory option has no/low impact onbusinesses and individuals or on the economy. The Office of Best Practice Regulation wasconsulted and confirmed that a Regulation Impact Statement was not required.

Future treaty action

32. The Agreement does not provide for amendments or for the negotiation of future legallybinding instruments. In the absence of specific procedures, the Parties may amend the Agreementby mutual consent at any time. Any future amendments would be subject to the normal treatyprocess, including tabling and consideration by the Joint Standing Committee on Treaties (JSCOT).Any such amendments to the Agreement may be considered in line with Australian policy for TIEA

negotiations current at that time.

Withdrawal or denunciation

33. Article 14 provides that the Agreement shall remain in force until terminated by either Partyin writing. Termination would take effect on the first day of the month following the expiration ofsix months after the date of receipt of the notice of termination by the other Party. However, bothParties would remain bound by the confidentiality obligations contained in Article 8. This ensuresthe continued protection of information exchanged under the Agreement between the two Parties.

34. Termination by Australia would be subject to the normal treaty process, including tabling

and consideration by JSCOT.

Contact details

International Tax and Treaties DivisionDepartment of the Treasury

ATTACHMENT ON CONSULTATION

Agreement between the Government of Australia and the Government ofthe Cook Islands on the Exchange of Information with Respect to Taxes,

done at Rarotonga on 27 October 2009[2009 ] ATNIF 30

CONSULTATION

35. The Agreement with the Cook Islands addresses only administrative matters, namelyfacilitating the full exchange of information between tax authorities. Accordingly, the public wasnot consulted.

36. The ATO was consulted in the development of the Australian model TIEA and ATOofficials negotiated the text of the Agreement with the Cook Islands. The ATO will administer theAgreement once it is implemented.

37. In addition to the Assistant Treasurer, the Minister for Foreign Affairs, the Minister forTrade and the Prime Minister approved the treaty action.

DEPARTMENT OF FOREIGN AFFAIRS AND TRADE

CANBERRA

AGREEMENT BETWEEN

THE GOVERNMENT OF AUSTRALIA

AND

THE GOVERNMENT OF THE COOK ISLANDS

ON

THE ALLOCATION OF TAXING RIGHTS WITH RESPECT TO CERTAIN INCOME OF

INDIVIDUALS

AND

TO ESTABLISH A MUTUAL AGREEMENT PROCEDURE IN RESPECT OF TRANSFER

PRICING ADJUSTMENTS

(Rarotonga, 27 October 2009)

Not yet in force

[2009] ATNIF 31

The Government of Australia and the Government of the Cook Islands ("the Contracting Parties"),

Recognising that the Contracting Parties have concluded an Agreement on the Exchange of

Information with Respect to Taxes, and

Desiring to conclude an Agreement for the allocation of taxing rights with respect to certain income

of individuals and to establish a mutual agreement procedure in respect of transfer pricing

adjustments,

Have agreed as follows:

ARTICLE 1

PERSONS COVERED

This Agreement shall apply to persons who are residents of one or both of the Contracting

Parties.

ARTICLE 2

TAXES COVERED

1 The existing taxes to which this Agreement shall apply are:

(a) in Australia, the income tax imposed under the federal law of Australia;

(hereinafter referred to as "Australian tax").

(b) in the Cook Islands, the income tax;

(hereinafter referred to as "Cook Islands tax").

2 This Agreement shall also apply to any identical or substantially similar taxes which

are imposed after the date of signature of this Agreement in addition to, or in place of, the existing

taxes. The competent authorities of the Contracting Parties shall notify each other within a

reasonable period of time of any substantial changes to the taxation laws covered by this

Agreement.

3 This Agreement shall not apply to taxes imposed by states, municipalities, local

authorities or other political subdivisions, or possessions of a Contracting Party.

ARTICLE 3

DEFINITIONS

1 For the purposes of this Agreement, unless the context otherwise requires:

(a) the term "Australia", when used in a geographical sense, excludes all external

territories other than:

(i) the Territory of Norfolk Island;

(ii) the Territory of Christmas Island;

(iii) the Territory of Cocos (Keeling) Islands;

(iv) the Territory of Ashmore and Cartier Islands;

(v) the Territory of Heard Island and McDonald Islands; and

(vi) the Coral Sea Islands Territory,

and includes any area adjacent to the territorial limits of Australia (including the

Territories specified in this subparagraph) in respect of which there is for the time

being in force, consistently with international law, a law of Australia dealing with

the exploration for or exploitation of any of the natural resources of the exclusive

economic zone or the seabed and subsoil of the continental shelf;

(b) the term "the Cook Islands" means the territory of the Cook Islands;

(c) the term "competent authority" means, in the case of Australia, the Commissioner of

Taxation or an authorised representative of the Commissioner and in the case of the

Cook Islands, the Collector of Inland Revenue or an authorised representative of the

Collector;

(d) the term "Contracting Party" means Australia or the Cook Islands, as the context

requires;

(e) the term "person" includes an individual, a company and any other body of persons;

(f)

(g)

the term "tax " means Australian tax or Cook Islands tax , as the context requires; and

the term "transfer pricing adjustment "means an adjustment made by the competent

authority of a Contracting Party to the profits of an enterprise as a result of applying

the domestic law concerning taxes referred to in Article 2 of that Contracting Party

regarding transfer pricing.

2 As regards the application of this Agreement at any time by a Contracting Party, any term

not defined therein shall , unless the context otherwise requires , have the meaning that it has at that

time under the law of that Contracting Party, for the purposes of the taxes to which this Agreement

applies, with any meaning under the applicable tax laws of that Contracting Party prevailing over a

meaning given to the term under other laws of that Contracting Party.

ARTICLE 4

RESIDENT

1 For the purposes of this Agreement , the term "resident of a Contracting Part y" means:

(a) in the case of Australia , a person who is a resident of Australia for the purposes of

Australian tax; and

(b) in the case of the Cook Islands, a person who is a resident of the Cook Islands for the

purposes of Cook Islands tax.

2 A person is not a resident of a Contracting Party for the purposes of this Agreement if the

person is liable to tax in that Contracting Party in respect only of income from sources in that

Contracting Party.

3 Where by reason of the preceding provisions of this Article a person, being an individual, is

a resident of both Parties, then the person 's status shall be determined as follows:

(a) the individual shall be deemed to be a resident only of the Contracting Party in

which a permanent home is available to that individual ; if a permanent home is

available in both Parties, or in neither of them, that individual shall be deemed to be

a resident only of the Contracting Party with which the individual 's personal and

economic relations are closer (centre of vital interests);

(b) if the Contracting Party in which the individual has their centre of vital interests

cannot be determined, the individual shall be deemed to be a resident only of the

Contracting Party in which the individual has an habitual abode;

(c) if the individual has an habitual abode in both Contracting Parties, or in neither of

them, the competent authorities of the Contracting Parties shall settle the question by

mutual agreement.

4 Where by reason of paragraph 1 a person other than an individual is a resident of both

Parties, then it shall be deemed to be a resident only of the Contracting Party in which its place of

effective management is situated.

ARTICLE 5

PENSIONS AND RETIREMENT ANNUITIES

1 Pensions (including government pensions) and retirement annuities paid to an individual

who is a resident of a Contracting Party shall be taxable only in that Party. However, pensions and

retirement annuities arising in a Contracting Party may be taxed in that Party where such income is

not subject to tax in the other Contracting Party.

The term "retirement annuity" means:

(a) in the case of Australia, a superannuation annuity payment within the meaning of the

taxation laws of Australia;

(b) in the case of the Cook Islands, an annuity payment that is not an approved annuity

within the meaning of the taxation laws of the Cook Islands; and

(c) any other similar periodic payment agreed upon by the competent authorities.

ARTICLE 6

GOVERNMENT SERVICE

1 (a) Salaries, wages and other similar remuneration, other than a pension or retirement

annuity, paid by a Contracting Party or a political subdivision or a local authority

thereof to an individual in respect of services rendered to that Contracting Party or

subdivision or authority shall be taxable only in that Contracting Party.

(b) However, such salaries , wages and other similar remuneration shall be taxable only

in the other Contracting Party if the services are rendered in that Party and the

individual is a resident of that Parry who:

(i) is a national or citizen of that Contracting Party; or

(ii) did not become a resident of that Party solely for the purpose of rendering the

services.

2 Notwithstanding the provisions of paragraph 1, salaries, wages and other similar

remuneration in respect of services rendered in connection with any trade or business carried on by

a Contracting Party or a political subdivision or a local authority thereof may be taxed in

accordance with the laws of a Party.

ARTICLE 7

STUDENTS

Payments which a student or business apprentice who is or was immediately before visiting a

Contracting Party a resident of the other Contracting Party and who is temporarily present in the

first-mentioned Party solely for the purpose of their education or training, receives for the purpose

of their maintenance , education or training shall not be taxed by that Party , provided such payments

arise from sources outside that Party.

ARTICLE 8

MUTUAL AGREEMENT PROCEDURE IN RESPECT OF TRANSFER PRICINGADJUSTMENTS

1 Where a resident of a Contracting Party considers the actions of the other Contracting Party

results or will result in a transfer pricing adjustment not in accordance with the arm ' s length

principle , the resident may, irrespective of the remedies provided by the domestic law of those

Parties, present a case to the competent authority of the first -mentioned Party. The case must be

presented within 3 years of the first notification of the adjustment.

2 The competent authorities shall endeavour to resolve any difficulties or doubts arising as to

the application of the arm's length principle by a Contracting Party regarding transfer pricing

adjustments. They may also communicate with each other directly for the purposes of this Article.

ARTICLE 9

EXCHANGE OF INFORMATION

The competent authorities of the Contracting Parties shall exchange such information as is

forseeably relevant for carrying out the provisions of this Agreement. Information may be

exchanged by the competent authorities for the purposes of this Article in accordance with the

provisions of the Agreement on the Exchange of Information with Respect to Taxes concluded by

the Contracting Parties (whether or not this Agreement, in whole or in part, forms part of the

domestic law of either Contracting Party).

ARTICLE 10

ENTRY INTO FORCE

The Contracting Parties shall notify each other, in writing, through the diplomatic channel of

the completion of their constitutional and legal procedures for the entry into force of this

Agreement. This Agreement shall enter into force on the date of the last notification, and shall,

provided an Agreement on the Exchange of Information with Respect to Taxes is in force between

the Contracting Parties, thereupon have effect:

(a) in respect of Australian tax, for any year of income beginning on or after 1 July in

the calendar year next following the date on which this Agreement enters into force;

and

(b) in respect of Cook Islands tax, for any year of income beginning on or after 1

January in the calendar year following the date on which this Agreement enters into

force.

ARTICLE 11

TERMINATION

1 This Agreement shall continue in effect indefinitely, but either of the Contracting Parties

may give to the other Contracting Party written notice of termination.

2 Such termination shall become effective:

(a) in respect of Australian tax, in the year of income beginning on or after 1 July in the

calendar year next following that in which the notice of termination is given; and

(b) in respect of Cook Islands tax, in the year of income beginning on or after 1 January

in the calendar year following that in which the notice of termination is given.

3 Notwithstanding the provisions of paragraph 1 or 2, this Agreement shall, on receipt through

the diplomatic channel of written notice of termination of the Agreement on the Exchange of

Information with Respect to Taxes between the Contracting Parties, terminate and cease to be

effective on the first day of the month following the expiration of a period of 6 months after the date

of receipt of such notice.

IN WITNESS WHEREOF the undersigned, duly authorised thereto by their respective

Governments, have signed this Agreement.

DONE at Rarotonga on this twenty seventh day of October 2009,

in duplicate.

FOR THE GOVERNMENT OF FOR THE GOVERNMENT OF THEAUSTRALIA: COOK ISLANDS:

Senator Nick Sherry Sir Terepai Maoate

Assistant Treasurer Prime Minister

DOCUMENTS TO BE TABLED ON 29 MARCH 2010:

® National Interest Analysis [2010] ATNIA 8

with attachment on consultation

® Agreement between the Government of Australia and theGovernment of the Cook Islands on the Allocation of TaxingRights with Respect to Certain Income of Individuals and toEstablish a Mutual Agreement Procedure in Respect ofTransfer Pricing Adjustments,done at Rarotonga on 27 October 2009

[2009] ATNIF 31

NATIONAL, INTEREST ANALYSIS: CATEGORY 2 TREATY

SUMMARY PAGE

Agreement between the Government of Australia and the Government of the CookIslands on the Allocation of Taxing Rights with Respect to Certain Income of

Individuals and to Establish a Mutual Agreement Procedure in Respect of TransferPricing Adjustments,

done at Rarotonga on 27 October 2009[20091 ATNIF 31

Nature and timing of proposed treaty action

1. The proposed treaty action is to bring the Agreement between the Government ofAustralia and the Government of the Cook Islands on the Allocation of Taxing Rights withRespect to Certain Income of Individuals and to Establish a Mutual Agreement Procedure inRespect of Transfer Pricing Adjustments (the Agreement) into force. Pursuant to Article 10,the Agreement will enter into force on the date of the completion of an exchange ofnotifications through the appropriate channel between Australia and the Cook Islandsestablishing that constitutional and legal procedures for entry into force have been completed.

2. The Agreement will then have effect:

a) in respect of Australian tax, for any year of income beginning on or after 1 July in thecalendar year following the date of entry into force; and

b) in respect of Cook Islands tax, for any year of income beginning on or after 1 Januaryin the calendar year following the date of entry into force.

3. For example, if the Agreement enters into force during 2010, it will have effect inrespect of Cook Islands tax from 1 January 2011, and in respect of Australian tax from 1 July2011.

Overview and national interest summary

4. The Agreement provides for the allocation of taxing rights between Australia and theCook Islands with respect to certain income of certain classes of individuals who areresidents of Australia or the Cook Islands. This helps to prevent double taxation of the sameincome. It also establishes a mechanism to assist in the resolution of disputes arising fromtransfer pricing adjustments made to taxpayers' income by the revenue authorities ofAustralia or the Cook Islands. The Agreement is consistent with provisions contained inAustralia's comprehensive bilateral tax treaties.

5. The Cook Islands is a self-governing parliamentary democracy in free associationwith New Zealand. The Cook Islands is fully responsible for its internal affairs but NewZealand retains responsibility for external affairs and defence, in consultation with the CookIslands. It has a low-tax structure and operates an offshore financial centre.

6. Detailed information on the level and type of economic activity between Australia andthe Cook Islands is not available. However, data held by the Australian Transaction Reportsand Analysis Centre indicates that a significant amount of funds flows between Australia andthe Cook Islands.

7. The Agreement is part of a package of benefits offered to the Cook Islands as part ofnegotiations to conclude a Tax Information Exchange Agreement (TIEA) with Australia.That TIEA - the Agreement between the Government ofAustralia and the Government of theCook Islands on the Exchange of Information with Respect to Taxes - was signed

simultaneously with the Agreement on 27 October 2009.

Reasons for Australia to take the proposed treaty action

8. The Agreement supports Australia's efforts to combat offshore tax evasion throughthe establishment of transparency measures and effective exchange of informationarrangements with low-tax jurisdictions. The Agreement was signed in conjunction with aTIEA between Australia and the Cook Islands on 27 October 2009. TIEAs are the bilateralmeans that facilitate the provision of information by low-tax jurisdictions, and enhanceAustralia's ability to protect its revenue base and improve the integrity of the tax system.

9. The Cook Islands' commitment to implement the Agreement is a positive step in itsrelationship with Australia.

Obligations

10. Article 1 provides that the Agreement applies only to persons who are residents (asdefined in Article 4) of Australia and/or the Cook Islands. This precludes non-residents fromobtaining the benefits of the Agreement. Pursuant to Article 4, a resident is a person who isresident in Australia or the Cook Islands for taxation purposes. However, a person is not aresident of a Party for the purposes of the Agreement if they are only liable to tax in thatParty in respect of income from sources in that Party. For Australia, the Agreement onlyapplies to federal income tax, and does not apply to State and Territory taxes (Article 2).

11. Under Articles 5, 6 and 7 of the Agreement, each Party is obliged to forego its taxingrights over certain income derived by retirees, pensioners, government employees, studentsand business apprentices, where they are residents of the other Party.

12. Article 5 obliges Australia not to tax Australian source pensions and retirementannuities paid to residents of the Cook Islands, provided such income is subject to tax in theCook Islands. Article 5 permits Australia to tax Cook Islands source pensions and retirementannuities paid to Australian residents.

13. Article 6 obliges Australia not to tax the salaries of government employees of theCook Islands working in government service, for non-commercial purposes, in Australia.This would apply, for example, to Cook Islands residents who staff representative officesestablished in Australia to provide information on investment opportunities in the CookIslands. This approach provides Australia and the Cook Islands with sole taxing rights overthe salaries they pay to individuals undertaking governmental functions.

14. Article 7 obliges Australia not to tax maintenance, education or training paymentsreceived by students or business apprentices from the Cook Islands who are temporarilystudying in Australia, where those payments arise from sources outside Australia. Otherincome will remain liable to Australian tax as required under Australian law.

15. Article 8 establishes a mechanism to assist in the resolution of disputes arising fromtransfer pricing adjustments made to taxpayers' income by the revenue authorities ofAustralia or the Cook Islands. Article 8 permits taxpayers affected by the actions of oneParty to present a case to the competent authority of the other Party and obliges Australia andthe Cook Islands to endeavour to resolve such disputes. Affected taxpayers must invoke thisprocess within three years of the first notification of the relevant adjustment.

16. Article 9 obliges the Parties to exchange information that is foreseeably relevant forthe purposes of carrying out the Agreement. Article 9 specifies that any information may be

exchanged pursuant to the provisions of the Agreement between the Government of Australiaand the Government of the Cook Islands on the Exchange of Information with Respect to

Taxes, done at Rarotonga on 27 October 2009.

Implementation

17. To give effect to the Agreement, minor amendments to the International Tax

Agreements Act 1953 will be necessary, including the insertion of the Agreement as aSchedule to that Act. Legislation for this purpose is expected to be introduced intoParliament in 2010.

18. The implementation of the Agreement will not affect the existing roles of theCommonwealth or the States and Territories in tax matters.

Costs

19. The Agreement will have a financial impact on the Australian Taxation Office (ATO),which will administer it. However , the small number of taxpayers likely to be affected by theAgreement ensures that this impact will be minimal.

20. Affected Australian residents are unlikely to incur any significant compliance costs inrelation to the Agreement, which may provide them with benefits.

21. Overall, it is estimated that the administrative and financial impact of concluding theAgreement will be minimal and can be absorbed into existing administrative arrangementsrelating to Australia's bilateral comprehensive tax treaties.

Regulation Impact Statement

22. The Treasury has assessed the implementation of the Agreement against criteria in theBest Practice Regulation Handbook and has concluded that this regulatory option has no/lowimpact on businesses and individuals or on the economy. The Office of Best PracticeRegulation was consulted and confirmed that a Regulation Impact Statement was notrequired.

Future treaty action

23. The Agreement does not provide for amendments or for the negotiation of futurelegally binding instruments. In the absence of specific procedures, the Parties may amend theAgreement by mutual consent at any time. Any such amendments would be subject to thenormal treaty process, including tabling and consideration by the Joint Standing Committeeon Treaties (JSCOT). Any future amendments to the Agreement may be considered in linewith Australian policy for tax treaty negotiations current at that time.

Withdrawal or denunciation

24. Article 11(1) provides that the Agreement shall remain in force until terminated by

written notice from either Party.

25. Article 11(2) provides that such termination would take effect, in respect of Australiantax, from 1 July in the calendar year following that in which the notice of termination is given

and, in respect of Cook Islands tax, from 1 January in the calendar year following that inwhich the notice of termination is given.

26. In addition, Article 11(3) provides that the Agreement will terminate and cease to beeffective six months after the receipt of notice from either Party terminating the relatedAgreement between the Government ofAustralia and the Government of the Cook Islands onthe Exchange of Information with Respect to Taxes.

27. Termination by Australia would be subject to the normal treaty process, includingtabling and consideration by JSCOT.

Contact details

International Tax Framework UnitDepartment of the Treasury

ATTACHMENT ON CONSULTATION

Agreement between the Government of Australia and the Government of thethe Cook Islands for the Allocation of Taxing Rights with Respect to Certain Income of

Individuals and to Establish a Mutual Agreement Procedure in Respect of TransferPricing Adjustments,

done at Rarotonga on 27 October 2009[2009] ATNIF 31

CONSULTATION

28. These negotiations with the Cook Islands were not in the public domain and,consequently, the public was not consulted.

29. The ATO was consulted in the development of the Australian model `additionalbenefits' Agreement, which was used as a basis for the Agreement, and ATO officialsnegotiated the text of this proposed Agreement with the Cook Islands. The ATO will

administer the Agreement.

30. In addition to the Assistant Treasurer, the Minister for Foreign Affairs, the Ministerfor Trade and the Prime Minister have agreed to this treaty.

DEPARTMENT OF FOREIGN AFFAIRS AND TRADE

CANBERRA

AGREEMENT BETWEEN

THE GOVERNMENT OF AUSTRALIA

AND

THE GOVERNMENT OF GIBRALTAR

ON

THE EXCHANGE OF INFORMATION WITH RESPECT TO TAXES

(London, 25 August 2009)

Not yet in force

[2009] ATNIF 24

BETWEEN THE GOVE RNMENT OF AUSTRALIA AND THE GOVERNMENT OF

GIBRALTAR ON THE EXCHANGE OF INFORMATION WITH RESPECT TO T

Whereas Australia and Gibraltar (the "Parties") recognise that present legislation already provides

for co-operation and the exchange of information in criminal tax matters;

Whereas the Parties have long been active in international efforts in the fight against financial and

other crimes, including the targeting of terrorist financing;

Whereas it is acknowledged that Gibraltar under the terms of its Entrustment from the United

Kingdom has the right to negotiate, conclude, perform and, subject to the terms of this Agreement,

terminate a tax information exchange agreement with Australia;

Whereas Gibraltar on 27 February 2002 entered into a political commitment to the OECD's

principles. of effective exchange of information;

Whereas the Parties wish to enhance and facilitate the terms and conditions governing the exchange

of information relating to taxes;

Now, therefore, the Parties have agreed to conclude the following Agreement which contains

obligations on the part of Australia and Gibraltar only:

ARTICLE 1

OBJECT AND SCOPE OF THIS AGREEMENT

The competent authorities of the Contracting Parties shall provide assistance through exchange of

information that is foreseeably relevant to the administration and enforcement of the domestic laws

of those Parties concerning taxes covered by this Agreement. Such information shall include

information that is foreseeably relevant to the determination, assessment and collection of such

taxes, the recovery and enforcement of tax claims, or the investigation or prosecution of tax matters.

Information shall be exchanged in accordance with the provisions of this Agreement and shall be

treated as confidential in the manner provided in Article 8. The rights and safeguards secured to

persons by the laws or administrative practice of the Requested Party remain applicable. The

Requested Party shall use its best endeavours to ensure that any such rights and safeguards are not

applied in a manner that unduly prevents or delays effective exchange of information.

ARTICLE 2

JURISDICTION

A Requested Party is not obligated to provide information which is neither held by its

authorities nor in the possession or control of persons who are within its territorial jurisdiction.

ARTICLE 3

TAXES COVERED

1 The existing taxes which are the subject of this Agreement are:

(a) in Australia, taxes of every kind and description imposed under federal laws

administered by the Commissioner of Taxation; and

(b) in Gibraltar, income taxes.

2 This Agreement shall also apply to any identical or substantially similar taxes imposed after

the date of signature of this Agreement in addition to, or in place of, the existing taxes. The

Agreement shall also apply to such other taxes as may be agreed in an exchange of letters between

the Contracting Parties. The competent authorities of the Contracting Parties shall notify each other

of any substantial changes to the taxation and related information gathering measures covered by

this Agreement.

3 This Agreement shall not apply to taxes imposed by states, municipalities, or other political

subdivisions, or possessions of a Contracting Party.

2

ARTICLE 4

DEFINITIONS

1 For the purposes of this Agreement, unless otherwise defined:

(a) the term "Applicant Party" means the Contracting Party requesting information;

(b) the term "Australia", when used in a geographical sense, excludes all external territories

other than:

(i) the Territory of Norfolk Island;

(ii) the Territory of Christmas Island;

(iii) the Territory of Cocos (Keeling) Islands;

(iv) the Territory of Ashmore and Cartier Islands;

(v) the Territory of Heard Island and McDonald Islands; and

(vi) the Coral Sea Islands Territory,

and includes any area adjacent to the territorial limits of Australia (including the

Territories specified in this subparagraph) in respect of which there is for the time being

in force, consistently with international law, a law of Australia dealing with the

exploration for or exploitation of any of the natural resources of the exclusive economic

zone or the seabed and subsoil of the continental shelf;

(c) the term "Gibraltar" means the territory of Gibraltar;

(d) the term "collective investment fund or scheme" means any pooled investment vehicle,

irrespective of legal form. The term "public collective investment fund or scheme"

means any collective investment fund or scheme provided the units, shares or other

interests in the fund or scheme can be readily purchased, sold or redeemed by the

public. Units, shares or other interests in the fund or scheme can be readily purchased,

sold or redeemed "by the public" if the purchase, sale or redemption is not implicitly or

explicitly restricted to a limited group of investors;

(e) the term "company" means any body corporate or any entity that is treated as a body

corporate for tax purposes;

3

(f)

(g)

the term "competent authority" means in the case of Australia, the Commissioner of

Taxation or an authorised representative of the Commissioner and, in the case of

Gibraltar, the Chief Secretary or such other person as the Minister of Finance may

appoint;

the term "Contracting Party" means Australia or Gibraltar as the context requires;

(h) the term "criminal laws" means all criminal laws designated as such under domestic law

irrespective of whether contained in the tax laws, the criminal code or other statutes;

(i) the term "criminal tax matters" means tax matters involving intentional conduct which

is liable to prosecution under the criminal laws of the Applicant Party;

(j) the term "enterprise" applies to the carrying on of any business;

(k) the term "information" means any fact, statement or record in any form whatever;

(1) the term "information gathering measures" means laws and administrative or judicial

procedures that enable a Contracting Party to obtain and provide the requested

information;

(m) the term "person" includes an individual, a company and any other body of persons;

(n) the term "principal class of shares" means the class or classes of shares representing a

majority of the voting power and value of the company;

(o) the term "publicly traded company" means any company whose principal class of shares

is listed on a recognised stock exchange provided its listed shares can be readily

purchased or sold by the public. Shares can be purchased or sold "by the public" if the

purchase or sale of shares is not implicitly or explicitly restricted to a limited group of

investors;

(p) the term "recognised stock exchange" means any stock exchange agreed upon by the

competent authorities of the Contracting Parties;

(q) the term "Requested Party" means the Contracting Party requested to provide

information; and

(r) the term "tax" means any tax to which this Agreement applies.

4

2 As regards the application of this Agreement at any time by a Contracting Party, any term

not defined therein shall , unless the context otherwise requires, have the meaning that it has at that

time under the law of that Party, any meaning under the applicable tax laws of that Parry prevailing

over a meaning given to the term under other laws of that Party.

ARTICLE 5

EXCHANGE OF INFORMATION UPON REQUEST

1 The competent authority of the Requested Party shall provide upon request information for

the purposes referred to in Article 1. Such information shall be exchanged without regard to

whether the conduct being investigated would constitute a crime under the laws of the Requested

Party if such conduct occurred in the Requested Party.

2 If the information in the possession of the competent authority of the Requested Party is not

sufficient to enable it to comply with the request for information , that Party shall use all relevant

information gathering measures to provide the Applicant Party with the information requested,

notwithstanding that the Requested Party may not need such information for its own tax purposes.

3 If specifically requested by the competent authority of the Applicant Party, the competent

authority of the Requested Party shall provide information under this Article, to the extent

allowable under its domestic laws, in the form of depositions of witnesses and authenticated copies

of original records.

4 Each Contracting Party shall ensure that its competent authority , for the purposes specified in

Article 1 of this Agreement , has the authority to obtain and provide upon request:

(a) information held by banks, other financial institutions , and any person acting in an

agency or fiduciary capacity including nominees and trustees;

(b) information regarding the ownership of companies , partnerships , trusts, foundations,

"Anstalten" and other persons, including , within the constraints of Article 2 , ownership

information on all such persons in an ownership chain; in the case of trusts , information

on settlors , trustees , beneficiaries and protectors; and in the case of foundations,

information on founders , members of the foundation council and beneficiaries. Further,

this Agreement does not create an obligation on the Contracting Parties to obtain or

-5-

provide ownership information with respect to publicly traded companies or public

collective investment funds or schemes unless such information can be obtained without

giving rise to disproportionate difficulties.

5 The competent authority of the Applicant Party shall provide the following information to the

competent authority of the Requested Party when making a request for information under this

Agreement to demonstrate the foreseeable relevance of the information to the request:

(a) the identity of the person under examination or investigation;

(b) a statement of the information sought including its nature and the form in which the

Applicant Party wishes to receive the information from the Requested Party;

(c) the tax purpose for which the information is sought;

(d) the grounds for believing that the information requested is held in the Requested Party

or is in the possession or control of a person within the jurisdiction of the Requested

Party;

(e) to the extent known, the name and address of any person believed to be in possession of

the requested information;

(t)

(g)

a statement that the request is in conformity with the law and administrative practices of

the Applicant Party, that if the requested information was within the jurisdiction of the

Applicant Party then the competent authority of the Applicant Party would be able to

obtain the information under the laws of the Applicant Party or in the normal course of

administrative practice and that the information request is in conformity with this

Agreement; and

a statement that the Applicant Party has pursued all means available in its own territory

to obtain the information, except those that would give rise to disproportionate

difficulties.

6 The competent authority of the Requested Party shall forward the requested information as

promptly as possible to the Applicant Party. To ensure a prompt response, the competent authority

of the Requested Party shall:

-6

(a) confirm receipt of a request in writing to the competent authority of the Applicant Party

and shall notify the competent authority of the Applicant Party of deficiencies in the

request, if any, within 60 days of the receipt of the request; and

(b) if the competent authority of the Requested Party has been unable to obtain and provide

the information within 90 days of receipt of the request, including if it encounters

obstacles in furnishing the information or it refuses to furnish the information, it shall

immediately inform the Applicant Party, explaining the reason for its inability, the

nature of the obstacles or the reasons for its refusal.

ARTICLE 6

TAX EXAMINATIONS ABROAD

1 A Contracting Party may allow representatives of the competent authority of the other

Contracting Party to enter the territory of the first-mentioned Party to interview individuals and

examine records with the written consent of the persons concerned. The competent authority of the

second-mentioned Party shall notify the competent authority of the first-mentioned Party of the time

and place of the meeting with the individuals concerned.

2 At the request of the competent authority of one of the Contracting Parties, the competent

authority of the other Contracting Party may allow representatives of the competent authority of the

first-mentioned Party to be present at the appropriate part of a tax examination in the second-

mentioned Party.

3 If the request referred to in paragraph 2 is acceded to, the competent authority of the

Contracting Party conducting the examination shall, as soon as possible, notify the competent

authority of the other Party about the time and place of the examination, the authority or official

designated to carry out the examination and the procedures and conditions required by the first-

mentioned Party for the conduct of the examination. All decisions with respect to the conduct of

the tax examination shall be made by the Party conducting the examination.

7

ARTICLE 7

POSSIBILITY OF DECLINING A REQUEST

1 The Requested Party shall not be required to obtain or provide information that the Applicant

Party would not be able to obtain under its own laws for purposes of the administration or

enforcement of its own tax laws. The competent authority of the Requested Party may decline to

assist where the request is not made in conformity with this Agreement.

2 The provisions of this Agreement shall not impose on a Contracting Party the obligation to

supply information which would disclose any trade, business, industrial, commercial or professional

secret or trade process. Notwithstanding the foregoing, information of the type referred to in

paragraph 4 of Article 5 shall not be treated as such a secret or trade process merely because it

meets the criteria in that paragraph.

3 The provisions of this Agreement shall not impose on a Contracting Party the obligation to

obtain or provide information, which would reveal confidential communications between a client

and an attorney, solicitor or other admitted legal representative where such communications are:

(a) produced for the purposes of seeking or providing legal advice; or

(b) produced for the purposes of use in existing or contemplated legal proceedings.

4 The Requested Party may decline a request for information if the disclosure of the

information would be contrary to public policy (ordre public).

5 A request for information shall not be refused on the ground that the tax claim giving rise to

the request is disputed by the taxpayer.

6 The Requested Party may decline a request for information if the information is requested

by the Applicant Party to administer or enforce a provision of the tax law of the Applicant Party, or

any requirement connected therewith, which discriminates against a national of the Requested Party

as compared with a national of the Applicant Party in the same circumstances.

8

ARTICLE 8

CONFIDENTIALITY

Any information received by a Contracting Party under this Agreement shall be treated as

confidential and may be disclosed only to persons or authorities (including courts and

administrative bodies) in the jurisdiction of the Contracting Party concerned with the assessment or

collection of, the enforcement or prosecution in respect of, or the determination of appeals in

relation to, the taxes covered by this Agreement. Such persons or authorities shall use such

information only for such purposes. They may disclose the information in public court proceedings

or in judicial decisions. The information may not be disclosed to any other person or entity or

authority or any other jurisdiction without the express written consent of the competent authority of

the Requested Party.

ARTICLE 9

COSTS

Unless the competent authorities of the Contracting Parties otherwise agree, ordinary costs

incurred in providing assistance shall be borne by the Requested Party, and extraordinary costs

incurred in providing assistance (including reasonable costs of engaging external advisors in

connection with litigation or otherwise) shall be borne by the Applicant Party. At the request of

either Contracting Party, the competent authorities shall consult as necessary with regard to this

Article, and in particular the competent authority of the Requested Party shall consult with the

competent authority of the Applicant Party in advance if the costs of providing information with

respect to a specific request are expected to be significant.

ARTICLE 10

IMPLEMENTATION LEGISLATION

The Contracting Parties shall enact any legislation necessary to comply with, and give effect

to, the terms of this Agreement.

9

ARTICLE 11

NO PREJUDICIAL OR RESTRICTIVE MEASURES

1 Neither of the Contracting Parties shall apply prejudicial or restrictive measures based on

harmful tax practices to residents or nationals of either Contracting Party so long as this Agreement

is in force and effective.

2 For the purposes of this Article, "prejudicial or restrictive measure based on harmful tax

practices" means a measure applied by one Contracting Party to residents or nationals of either

Contracting Party on the basis that the other Contracting Parry does not engage in effective

exchange of information and/or because it lacks transparency in the operation of its laws,

regulations or administrative practices, or on the basis of no or nominal taxes and one of the

preceding criteria.

3 Without limiting the generality of paragraph 2 the term "prejudicial or restrictive measure"

includes the denial of a deduction, credit or exemption, the imposition of a tax, charge or levy, or

special reporting requirements.

4 A "prejudicial or restrictive measure" does not include generally applicable measures,

applied by either Contracting Party, such as Controlled Foreign Companies, Foreign Investment

Funds, Transferor Trusts, transfer pricing, thin capitalisation, operation of dual exempt and foreign

tax credit systems or general information reporting rules that relate to the disclosure of information

from other countries or jurisdictions, or transactions with such countries or jurisdictions, such as

record keeping requirements imposed on foreign owned subsidiaries to ensure access to information

concerning parent companies.

ARTICLE 12

MUTUAL AGREEMENT PROCEDURE

1 The competent authorities of the Contracting Parties shall also jointly endeavour to resolve

any difficulties or doubts arising as to the interpretation or application of this Agreement.

-10-

2 In addition to the endeavours referred to in paragraph 3, the competent authorities of the

Contracting Parties may mutually determine the procedures to be used under Articles 5 and 6.

3 The competent authorities of the Contracting Parties may communicate with each other

directly for the purposes of this Article.

The Contracting Parties may also agree on other forms of dispute resolution.

ARTICLE 13

ENTRY INTO FORCE

The Government of Australia and the Government of Gibraltar shall notify each other in

writing through the appropriate channel of the completion of their constitutional and legal

procedures for the entry into force of this Agreement. This Agreement shall enter into force on the

date of the last notification, and shall thereupon have effect:

(a) for criminal tax matters on that date;

(b) for all other matters covered in Article 1 on that date, but only in respect of taxable

periods beginning on or after that date or, where there is no taxable period, all charges to tax

arising on or after that date

ARTICLE 14

TERMINATION

1 This Agreement shall continue in effect indefinitely, but either of the Contracting Parties may

give to the other Contracting Party through the appropriate channel written notice of termination. .

2 Such termination shall become effective on the first day of the month following the expiration

of a period of 3 months after the date of receipt of notice of termination by the other Contracting

Party.

-11-

3 Notwithstanding any termination of this Agreement, the Contracting Parties shall remain

bound by the provisions of Article 8 with respect to any information obtained under this Agreement.

IN WITNESS WHEREOF the undersigned, duly authorised thereto by their respective

Governments, have signed this Agreement.

DONE at London, in duplicate, on this twenty-fifth day of August 2009.

FOR THE GOVERNMENT OF FOR THE GOVERNMENT OFAUSTRALIA: GIBRALTAR:

.................................................... .....................................................Adam McCarthy James TippingActing High Commissioner Finance Centre Director

Ministry of Finance

DOCUMENTS TO BE TABLED ON 29 MARCH 2010:

® National Interest Analysis [2010] ATNIA 10

with attachment on consultation

® Agreement between the Government of Australia and theGovernment of Gibraltar on the Exchange of Information withRespect to Taxes,done at London on 25 August 2009

[2009] ATNIF 24

NATIONAL INTEREST ANALYSIS: CATEGORY 2 TREATY

SUMMARY PAGE

Agreement between the Government of Australia and the Government ofGibraltar on the Exchange of Information with Respect to Taxes,

done at London on 25 August 2009[2009] ATNIF 24

Nature and timing of proposed treaty action

1. The proposed treaty action is to bring the Agreement between the Government ofAustraliaand the Government of Gibraltar on the Exchange of Information with Respect to Taxes (theAgreement) into force. Pursuant to Article 13, the Agreement will enter into force on the date ofthe completion of an exchange of notifications between Australia and Gibraltar establishing that thenecessary domestic procedures for entry into force have been completed.

2. The Agreement will then have effect:

a) from the date of entry into force, with respect to criminal tax matters; andb) from the date of entry into force with respect to civil tax matters, but only relating to taxable

periods beginning on or after that date or, where there is no taxable period, charges to taxarising on or after that date.

Overview and national interest summary

3. The key objective of the Agreement , commonly referred to as a Tax Information ExchangeAgreement (TIEA), is to establish a legal basis for the exchange of tax information relating tocertain persons between the Governments of Australia and Gibraltar.

4. Gibraltar is a British overseas territory, located at the southern end of the Iberian Peninsulaat the entrance to the Mediterranean Sea, bordering the Strait of Gibraltar. It has a low-tax structureand is an internationally recognised offshore financial centre. Gibraltar has an entrustment from theUnited Kingdom to negotiate and sign a TIEA with Australia.

5. Detailed information on the level and type of economic activity between Australia andGibraltar is not available. However, as discussed in paragraph 12, available data indicates asignificant amount of funds flows between Australia and Gibraltar.

6. The Agreement will help Australia protect its revenue base by allowing the Commissionerof Taxation to request and receive certain information held in Gibraltar, and will help improve theintegrity of the tax system by discouraging tax evasion by individuals and businesses. TheAgreement also incorporates a number of important safeguards to protect the legitimate interests oftaxpayers, including requirements in relation to confidentiality and legal privilege.

7. Australia has signed 13 TIEAs, five of which have entered into force (Antigua and Barbuda,Bermuda, Isle of Man, Jersey and Netherlands Antilles) and eight of which have yet to enter intoforce (Aruba, British Virgin Islands, the Cook Islands, Guernsey, Gibraltar, Samoa, San Marino andSt Kitts and Nevis). The Agreement with Gibraltar is a part of Australia's efforts to conclude TIEAswith jurisdictions that have committed to work with Organisation for Economic Cooperation andDevelopment (OECD) member countries to improve transparency and establish effectiveprocedures for the exchange of tax information.

Reasons for Australia to take the proposed treaty action

8. The Agreement, alongside TIEAs with other countries, is an important tool in Australia'sefforts to combat offshore tax evasion. The Agreement provides for the effective exchange ofinformation between Australia and Gibraltar, which will promote fairness and enhance Australia'sability to administer and enforce its domestic tax laws.

9. The Agreement is part of Australia's ongoing commitment to the OECD's work oneliminating harmful tax practices that contribute to international tax avoidance and evasion.Australia has taken a leadership role in this work and is currently the Chair of the Global Forum onTransparency and Exchange of Information for Tax Purposes, which has a membership of morethan 70 countries.

10. Since 2002, more than 40 low-tax jurisdictions, including Gibraltar, have publiclycommitted to the implementation of OECD standards of transparency and information exchange fortax purposes, which have been endorsed by both the United Nations and the G-20. These standards,when implemented, ensure the availability of information needed by tax authorities to determine ataxpayer's correct tax liability. TIEAs are the key bilateral means that facilitate the provision ofsuch information by low-tax jurisdictions.

11. In April 2002, the OECD released a model TIEA to facilitate negotiations between OECDmember countries and committed jurisdictions. In October 2003, the then Australian Treasurerapproved an Australian model TIEA which is closely aligned to the OECD model. The Agreementwith Gibraltar essentially follows the format of the Australian model TIEA.

12. Data held by the Australian Transaction Reports and Analysis Centre (AUSTRAC) indicatesa significant flow of funds between Australia and Gibraltar. While most financial flows to and fromlow-tax jurisdictions are legitimate, the legal frameworks and systems that make low- taxjurisdictions attractive for legitimate purposes may also be used in arrangements designed to evadepaying tax elsewhere. In particular, the use of secrecy laws to conceal assets and income that aresubject to Australian tax is of concern to Australia.

13. It is in Australia's interest to develop a network of TIEAs with low-tax jurisdictions. TheAgreement, along with existing and future TIEAs, will make it harder for taxpayers to avoid orevade Australian tax and discourage those taxpayers from participating in illegitimate taxarrangements by increasing the probability of detection. This will help Australia protect its revenuebase and improve the integrity of Australia's tax system while enhancing Gibraltar's reputation as alocation for legitimate business activity.

14. Gibraltar's commitment to implement the Agreement is a positive step in its relationshipwith Australia. The OECD has issued a progress report on the implementation of internationallyagreed tax standards on the exchange of information, which identified Gibraltar as a jurisdictionthat has substantially implemented these standards.

Obligations

15. Article 5(1) of the Agreement obliges the competent authorities of the Parties to provide, onrequest, information that is foreseeably relevant to the administration and enforcement of theParties' domestic tax laws, including the collection of taxes and the investigation or prosecution oftax matters. A request for information must contain the details required by Article 5(5). Thisobligation applies irrespective of whether the conduct being investigated would constitute a crimeunder the domestic law of the requested Party if it occurred in the territory of that Party.

16. Article 5(2) provides that where the information in the possession of the requested Party isinsufficient to enable compliance with a request, the requested Party must use its informationgathering powers to obtain and provide the information, even if it is not needed for the requestedParty's domestic tax purposes. This is consistent with Article 26 (Exchange of Information) of theOECD Model Convention with Respect to Taxes on Income and on Capital, which has beenincorporated into Australia's tax treaty policy.

17. Article 5(4) obliges the Parties to ensure their competent authority has the authority toobtain and provide, upon request, information held by banks, other financial institutions and anyperson acting in an agency or fiduciary capacity, as well as information regarding the legal andbeneficial ownership of companies and partnerships and certain persons involved with trusts andfoundations. The Commissioner of Taxation currently has the necessary legal authority to meetAustralia's obligations under Article 5(4).

18 Article 5(6) obliges the Parties to acknowledge receipt of requests for information and toprovide the requested information with the least possible delay.

19. Article 6 provides that a Party may, on request, permit interviews with individuals and theexamination of records within its jurisdiction by officials of the other Party, with the written consentof the persons concerned.

20. Article 7 provides various grounds for the refusal of requests, including where requests arenot in conformity with the Agreement, if the disclosure of information would be contrary to publicpolicy of the requested Party and where the requesting Party would be unable to obtain therequested information under its own laws.

21. Article 8 obliges the Parties to keep information received confidential. Such informationmay be disclosed only to persons or authorities concerned with the administration and enforcementof taxation covered by the Agreement and may only be used for this purpose, although this mayinclude public court proceedings or judicial decisions. The express written consent of thecompetent authority of the requested Party is required for the disclosure of the requestedinformation to any other person, entity, authority or jurisdiction.

22. Article 9 obliges the requested Party to bear ordinary costs associated with requests forinformation, while extraordinary costs are to be borne by the requesting Party, unless the Partiesotherwise agree. Paragraphs 27 to 30 outline the financial impact of these obligations.

23. Article 11 obliges each Party to refrain from applying prejudicial or restrictive measures toresidents or nationals of the other Party on the basis that the other Party does not engage in effectiveexchange of information and/or because it lacks transparency in the operation of its laws,regulations or administrative practices. A prejudicial or restrictive measure includes the denial of adeduction, credit or exemption, the imposition of a tax, or special reporting requirements.

24. Article 12 requires the Parties to jointly endeavour to resolve any difficulties or doubtsarising as to the application or interpretation of the Agreement, and provides that the Parties mayalso agree on other forms of dispute resolution.

Implementation

25. Australia is able to fulfil its obligations under the Agreement under existing legislation,specifically section 23 of the International Tax Agreements Act 1953. No further legislation orregulation is required in order to implement the Agreement.

26. The implementation of the Agreement will not affect the existing roles of theCommonwealth or the States and Territories in tax matters.

Costs

27. The Agreement will have a small administrative and financial impact on the AustralianTaxation Office (ATO). As Gibraltar is unlikely to routinely need Australian information for itsown tax purposes, it is likely that most requests for information will originate from Australia. Someadditional resources may be required so that the ATO may provide technical assistance to Gibraltarin relation to its exchange of information procedures, if necessary.

28. The ATO and the Chief Secretary of Gibraltar will conclude a Memorandum ofUnderstanding, under which certain costs associated with Australian requests for information willbe borne by the ATO. Examples of such costs, classified as extraordinary costs, include:

a) reasonable fees charged by third parties for carrying out research;b) reasonable fees charged by third parties for copying documents;c) reasonable costs of engaging experts, interpreters or translators;d) reasonable costs of conveying documents to Australia;e) reasonable litigation costs of Gibraltar; andf) reasonable costs of obtaining depositions or testimony.

29. Australian residents are unlikely to incur significant compliance costs in relation to theAgreement. It is unlikely Australia will receive many requests for information from Gibraltar andtherefore be required to collect information from Australian residents.

30. Overall, it is estimated that the administrative and financial impact of the Agreement will beabsorbed by the ATO's existing exchange of information programme, which currently administerssimilar arrangements with more than 40 countries. On a broader level, as the Agreement is intendedto help reduce tax avoidance and evasion by Australian taxpayers, its general impact could result inincreased revenue collection by Australia.

Regulation Impact Statement

31. The Treasury has assessed the implementation of the Agreement against criteria in the Best

Practice Regulation Handbook and concluded that this regulatory option has no/low impact onbusinesses and individuals or on the economy. The Office of Best Practice Regulation wasconsulted and confirmed that a Regulation Impact Statement was not required.

Future treaty action

32. The Agreement does not provide for amendments or for the negotiation of future legallybinding instruments. In the absence of specific procedures, the Parties may amend the Agreementby mutual consent at any time. Any future amendments would be subject to the normal treatyprocess, including tabling and consideration by the Joint Standing Committee on Treaties (JSCOT).Any such amendments to the Agreement may be considered in line with Australian policy for TIEAnegotiations current at that time.

Withdrawal or denunciation

33. Article 14 provides that the Agreement shall remain in force until terminated by either Partyin writing. Termination would take effect on the first day of the month following the expiration ofthree months after the date of receipt of the notice of termination by the other Party. However, bothParties would remain bound by the confidentiality obligations contained in Article 8. This ensuresthe continued protection of information exchanged under the Agreement between the Parties.

34. Termination by Australia would be subject to the normal treaty process , including tablingand consideration by JSCOT.

Contact details

International Tax and Treaties DivisionDepartment of the Treasury

ATTACHMENT ON CONSULTATION

Agreement between the Government of Australia and the Government ofGibraltar on the Exchange of Information with Respect to Taxes,

done at London on 25 August 2009[2009] ATNIF 24

CONSULTATION

35. The Agreement with Gibraltar addresses only administrative matters, namely facilitating thefull exchange of information between tax authorities. Accordingly, the public was not consulted.

36. The ATO was consulted in the development of the Australian model TIEA and ATOofficials participated in the negotiation of the text of the Agreement with Gibraltar. The ATO willadminister the Agreement once it is implemented.

37. In addition to the Assistant Treasurer, the Minister for Foreign Affairs, the Minister forTrade and the Prime Minister approved the treaty action.

DEPARTMENT OF FOREIGN AFFAIRS AND TRADECANBERRA

AGREEMENT BETWEEN

THE GOVERNMENT OF AUSTRALIA

AND

THE STATES OF GUERNSEY

FOR

THE EXCHANGE OF INFORMATION RELATING TO TAX MATTERS

(London, 7 October 2009)

Not yet in force[2009] ATNIF 25

Agreement between the Government of Australia and the States of Guernsey forthe Exchange of Information relating to Tax Matters

Whereas the States of Guernsey and the Government of Australia ("the Parties")recognise that present legislation already provides for cooperation and the exchange ofinformation in criminal tax matters;

Whereas the Parties have long been active in international efforts in the fight againstfinancial and other crimes, including the targeting of terrorist financing;

Whereas it is acknowledged that the States of Guernsey under the terms of itsEntrustment from the United Kingdom has the right to negotiate, conclude, perform and,subject to the terms of this Agreement, terminate a tax information exchange agreement withthe Government of Australia;

Whereas the States of Guernsey on 21 February 2002 entered into a politicalcommitment to the OECD's principles of effective exchange of information;

Whereas the Parties wish to enhance and facilitate the terms and conditions governingthe exchange of information relating to taxes;

Now, therefore, the Parties have agreed to conclude the following agreement whichcontains obligations on the part of the Parties only:

Article 1Scope of the Agreement

The Parties through their competent authorities shall provide assistance throughexchange of information that is foreseeably relevant to the administration and enforcement ofthe domestic laws of the Parties concerning the taxes covered by this Agreement, includinginformation that is foreseeably relevant to the determination, assessment, enforcement orcollection of tax with respect to persons liable to such taxes, or to the investigation or theprosecution of tax matters in relation to such persons. A requested Party is not obliged toprovide information which is neither held by its authorities nor in the possession of orobtainable by persons who are within its territorial jurisdiction. The rights and safeguardssecured to persons by the laws or administrative practice of the requested Party remainapplicable. The requested Party shall use its best endeavours to ensure that no deliberateactions are taken to unduly prevent or delay the effective exchange of information.

Article 2Taxes Covered

1. This Agreement shall apply to the following taxes imposed by the Parties:

(a) in the case of Australia, taxes of every kind and description imposedunder the federal law of Australia;

(b) in the case of Guernsey:

(i) income tax;(ii) dwellings profits tax.

2. This Agreement shall apply also to any identical taxes imposed after the dateof signature of the Agreement in addition to or in place of the existing taxes.This Agreement shall also apply to any substantially similar taxes imposedafter the date of signature of the Agreement in addition to or in place of theexisting taxes, if the Parties so agree. The competent authority of each Partyshall notify the other within a reasonable period of time of any significantchanges in their taxation laws which may affect matters covered by thisAgreement.

3. This Agreement shall not apply to taxes imposed by states, municipalities orother political subdivisions , or possessions of a Party.

Article 3Definitions

1. In this Agreement:

(a) "Australia", when used in a geographical sense, excludes all externalterritories other than:

(i) the Territory of Norfolk Island;(ii) the Territory of Christmas Island;(iii) the Territory of Cocos (Keeling) Islands;(iv) the Territory of Ashmore and Cartier Islands;(v) the Territory of Heard Island and McDonald Islands; and(vi) the Coral Sea Islands Territory,

and includes any area adjacent to the territorial limits of Australia(including the Territories specified in this subparagraph) in respect ofwhich there is for the time being in force, consistently withinternational law, a law of Australia dealing with the exploration for orexploitation of any of the natural resources of the exclusive economiczone or the seabed and subsoil of the continental shelf;

(b) "Guernsey" means Guernsey, Alderney and Heim, including theterritorial sea adjacent to those islands, in accordance with internationallaw;

(c) "collective investment fund or scheme" means any pooled investmentvehicle, irrespective of legal form. The term "public collectiveinvestment fund or scheme" means any collective investment fund orscheme provided the units, shares or other interests in the fund orscheme can be readily purchased, sold or redeemed by the public.Units, shares or other interests in the fund or scheme can be readily

purchased, sold or redeemed "by the public" if the purchase, sale orredemption is not implicitly or explicitly restricted to a limited groupof investors;

(d) "company" means any body corporate or any entity that is treated as abody corporate for tax purposes;

(e) "competent authority" means, in the case of Australia, the Commissionerof Taxation or an authorised representative of the Commissioner and, inthe case of Guernsey, the Director of Income Tax or his delegate;

(f)

(g)

"criminal laws" means all criminal laws designated as such underdomestic law, irrespective of whether such are contained in the taxlaws, the criminal code or other statutes;

"criminal tax matters" means tax matters involving intentional conductwhether before or after the entry into force of this Agreement which isliable to prosecution under the criminal laws of the requesting Party;

(h) "information gathering measures" means laws and administrative orjudicial procedures enabling a requested Party to obtain and providethe information requested;

(i)

(0)

"information" means any fact, statement, document or record inwhatever form;

"person" means a natural person, a company or any other body orgroup of persons;

(k) "principal class of shares" means the class or classes of shares

representing a majority of the voting power and value of the company;

(1)

(m)

"publicly traded company" means any company whose principal classof shares is listed on a recognised stock exchange provided its listedshares can be readily purchased or sold by the public. Shares can bepurchased or sold "by the public" if the purchase or sale of shares isnot implicitly or explicitly restricted to a limited group of investors;

"recognised stock exchange" means any stock exchange agreed uponby the competent authorities of the Parties;

(n) "requested Party" means the Party to this Agreement which isrequested to provide or has provided information in response to a

request;

(o) "requesting Party" means the Party to this Agreement submitting arequest for or having received information from the requested Party;

(P) "tax" means any tax covered by this Agreement.

2. As regards the application of this Agreement at any time by a Party, any termnot defined therein shall, unless the context otherwise requires, have the

meaning that it has at that time under the laws of that Party, any meaningunder the applicable tax laws of that Party prevailing over a meaning given tothe term under other laws of that Party.

Article 4Exchange of Information Upon Request

The competent authority of the requested Party shall provide upon request bythe requesting Party information for the purposes referred to in Article 1. Suchinformation shall be exchanged without regard to whether the requested Partyneeds such information for its own tax purposes or the conduct beinginvestigated would constitute a crime under the laws of the requested Party ifit had occurred in the territory of the requested Party. The competent authorityof the requesting Party shall only make a request for information pursuant tothis Article when it is unable to obtain the requested information by othermeans, except where recourse to such means would give rise todisproportionate difficulty.

2. If the information in the possession of the competent authority of the requestedParty is not sufficient to enable it to comply with the request for information,the requested Party shall use all relevant information gathering measuresnecessary to provide the requesting Party with the information requested,notwithstanding that the requested Party may not need such information for itsown tax purposes.

3. If specifically requested by the competent authority of the requesting Party,the competent authority of the requested Party shall provide information underthis Article, to the extent allowable under its domestic laws, in the form ofdepositions of witnesses and authenticated copies of original records.

4. Each Party shall ensure that it has the authority, subject to the terms of Article1, to obtain and provide, through its competent authority and upon request:

(a) information held by banks, other financial institutions, and any person,including nominees and trustees, acting in an agency or fiduciarycapacity;

(b) (i) information regarding the legal and beneficial ownership ofcompanies, partnerships and other persons, and within theconstraints of Article 1 any other persons in an ownershipchain, including in the case of collective investment funds orschemes, information on shares, units and other interests;

(ii) in the case of trusts, information on settlors, trustees, protectorsand beneficiaries;

(iii) in the case of foundations, information on founders, membersof the foundation council and beneficiaries.

5. This Agreement does not create an obligation for a Party to obtain or provideownership information with respect to publicly traded companies or publiccollective investment funds or schemes , unless such information can beobtained without giving rise to disproportionate difficulties.

6. Any request for information shall be formulated with the greatest detailnecessary and shall specify in writing:

(a) the identity of the person under examination or investigation;

(b) the period for which the information is requested;

(c) the nature of the information requested and the form in which therequesting Parry would prefer to receive it;

(d) the tax purpose for which the information is sought;

(e) the reasons for believing that the information requested is foreseeablyrelevant to tax administration and enforcement of the requesting Party,with respect to the person identified in subparagraph (a) of thisparagraph;

(t)

(g)

the grounds for believing that the information requested is present inthe requested Party or is in the possession of or obtainable by a personwithin the jurisdiction of the requested Party;

to the extent known, the name and address of any person believed to bein possession of or able to obtain the information requested;

(h) a statement that the request conforms with the laws and administrativepractice of the requesting Party, that if the requested information waswithin the jurisdiction of the requesting Party then the competentauthority of the requesting Party would be able to obtain theinformation under the laws of the requesting Party or in the normalcourse of administrative practice and that it is in conformity with thisAgreement;

(i) a statement that the requesting Party has pursued all means available inits own territory to obtain the information , except where that wouldgive rise to disproportionate difficulty.

7. The competent authority of the requested Party shall acknowledge receipt ofthe request to the competent authority of the requesting Party and shall use itsbest endeavours to forward the requested information to the requesting Partywith the least possible delay.

Article 5Tax Examinations Abroad

1. With reasonable notice, the requesting Party may request that the requestedParty allow representatives of the competent authority of the requesting Party

to enter the territory of the requested Party, to the extent permitted under itsdomestic laws, to interview individuals and examine records with the priorwritten consent of the individuals or other persons concerned. The competentauthority of the requesting Party shall notify the competent authority of therequested Party of the time and place of the intended meeting with theindividuals concerned.

2. At the request of the competent authority of the requesting Party, thecompetent authority of the requested Party may permit representatives of thecompetent authority of the requesting Party to attend a tax examination in theterritory of the requested Party.

3. If the request referred to in paragraph 2 is granted, the competent authority ofthe requested Party conducting the examination shall, as soon as possible,notify the competent authority of the requesting Party of the time and place ofthe examination, the authority or person authorised to carry out theexamination and the procedures and conditions required by the requested Partyfor the conduct of the examination. All decisions regarding the conduct of theexamination shall be made by the requested Party conducting the examination.

Article 6Possibility of Declining a Request

1. The competent authority of the requested Party may decline to assist:

(a) where the request is not made in conformity with this Agreement;

(b) where the requesting Party has not pursued all means available in itsown territory to obtain the information, except where recourse to suchmeans would give rise to disproportionate difficulty; or

(c) where the disclosure of the information requested would be contrary topublic policy ('ordre public').

2. This Agreement shall not impose upon a requested Party any obligation toprovide information subject to legal privilege, or any trade, business,industrial, commercial or professional secret or trade process, provided thatinformation described in Article 4(4) shall not by reason of that fact alone betreated as such a secret or trade process.

3. A request for information shall not be refused on the ground that the tax claimgiving rise to the request is disputed by the taxpayer.

4. The requested Party shall not be required to obtain and provide informationwhich, if the requested information was within the jurisdiction of therequesting Party, the competent authority of the requesting Party would not beable to obtain under its laws or in the normal course of administrative practice.

5. The requested Party may decline a request for information if the information isrequested by the requesting Party to administer or enforce a provision of the

tax law of the requesting Party, or any requirement connected therewith,which discriminates against a citizen of the requested Party as compared witha citizen of the requesting Party in the same circumstances.

Article 7Confidentiality

1. All information provided and received by the competent authorities of theParties shall be kept confidential.

2. Information provided to the competent authority of the requesting Party maynot be used for any purpose other than for the purposes stated in Article 1without the prior written consent of the requested Party.

3. Information shall be disclosed only to persons or authorities (including courtsand administrative bodies) concerned with the purposes specified in Article 1,and used by such persons or authorities only for such purposes, including thedetermination of any appeal. For these purposes, information may be disclosedin public court proceedings or in judicial decisions.

4. Information provided to a requesting Party under this Agreement may not bedisclosed to any other jurisdiction.

Article 8Costs

Unless the competent authorities of the Parties otherwise agree, indirect costsincurred in providing assistance shall be borne by the requested Party, and directcosts incurred in providing assistance (including reasonable costs of engagingexternal advisers in connection with litigation or otherwise) shall be borne by therequesting Party. At the request of either Party, the competent authorities shallconsult as necessary with regard to this Article, and in particular the competentauthority of the requested Party shall consult with the competent authority of therequesting Party in advance if the costs of providing information with respect to aspecific request are expected to be significant.

Article 9No Prejudicial or Restrictive Measures

1. Neither of the Parties shall apply prejudicial or restrictive measures based onharmful tax practices to residents or citizens of either Party so long as thisAgreement is in force and effective.

2. For the purposes of this Article, a "prejudicial or restrictive measure based onharmful tax practices" means a measure applied by one Party to residents orcitizens of either Party on the basis that the other Party does not engage in

effective exchange of information and/or because it lacks transparency in theoperation of its laws, regulations or administrative practices, or on the basis ofno or nominal taxes and one of the preceding criteria.

3. Without limiting the generality of paragraph 2, the term "prejudicial orrestrictive measure" includes the denial of a deduction, credit or exemption,the imposition of a tax, charge or levy, or special reporting requirements.

Article 10Mutual Agreement Procedures

1. Where difficulties or doubts arise between the Parties regarding theimplementation or interpretation of this Agreement, the respective competentauthorities shall use their best efforts to resolve the matter by mutualagreement.

2. In addition to the agreements referred to in paragraph 1, the competentauthorities of the Parties may mutually agree on the procedures to be usedunder Articles 4, 5 and 8.

3. The Parties may agree on other forms of dispute resolution should this becomenecessary.

Article 11Entry into Force

The Parties shall notify each other, in writing, through the appropriate channel of thecompletion of their constitutional and legal procedures for the entry into force of thisAgreement. This Agreement shall enter into force on the date of the last notificationand shall thereupon have effect:

(a) for criminal tax matters on that date; and(b) for all other matters covered in Article 1 on that date, but only in respect of

taxable periods beginning on or after that date or, where there is no taxableperiod, all charges to tax arising on or after that date.

Article 12Termination

1. This Agreement shall remain in force until terminated by either Party.

2. Either Party may terminate this Agreement by giving notice of termination inwriting through the appropriate channel. Such termination shall becomeeffective on the first day of the month following the expiration of a period ofthree months after the date of receipt of notice of termination by the otherParty.

3. If the Agreement is terminated the Parties shall remain bound by theprovisions of Article 7 with respect to any information obtained under thisAgreement.

IN WITNESS WHEREOF the undersigned, duly authorised thereto by their respective

Governments, have signed this Agreement.

DONE at London, in duplicate, on this seventh day of October 2009.

For the Government of For the States ofAustralia: Guernsey:

John Cecil Dauth LVO Lyndon TrottHigh Commissioner Chief Minister

DOCUMENTS TO BE TABLED ON 29 MARCH 2010:

® National Interest Analysis [2010 ] ATNIA 12

with attachment on consultation

® Agreement between the Government of Australia and the States ofGuernsey for the Exchange of Information Relating to Tax Matters,done at London on 7 October 2009

[2009 ] ATNIF 25

NATIONAL INTEREST ANALYSIS: CATEGORY 2 TREATY

SUMMARY PAGE

Agreement between the Government of Australia and the States of Guernseyfor the Exchange of Information Relating to Tax Matters,

done at London on 7 October 2009[2009] ATNIF 25

Nature and timing of proposed treaty action

1. The proposed treaty action is to bring the Agreement between the Government ofAustraliaand the States of Guernsey for the Exchange of Information Relating to Tax Matters (theAgreement) into force. Pursuant to Article 11, the Agreement will enter into force on the date ofthe completion of an exchange of notifications between Australia and Guernsey establishing that thenecessary domestic procedures for entry into force have been completed.

2. The Agreement will then have effect:

a) from the date of entry into force, with respect to criminal tax matters; andb) from the date of entry into force with respect to civil tax matters, but only relating to taxable

periods beginning on or after that date or, where there is no taxable period, charges to taxarising on or after that date.

Overview and national interest summary

3. The key objective of the Agreement, commonly referred to as a Tax Information ExchangeAgreement (TIEA), is to establish a legal basis for the exchange of tax information relating tocertain persons between the Governments of Australia and Guernsey.

4. Guernsey is a British Crown Dependency, located in the English Channel. It has a low-taxstructure and is an internationally recognised offshore financial centre. Guernsey has anentrustment from the United Kingdom to negotiate and sign a TIEA with Australia.

5. Detailed information on the level and type of economic activity between Australia andGuernsey is not available. However, as discussed in paragraph 12, available data indicates asignificant amount of funds flows between Australia and Guernsey.

6. The Agreement will help Australia protect its revenue base by allowing the Commissionerof Taxation to request and receive certain information held in Guernsey, and will help improve theintegrity of the tax system by discouraging tax evasion by individuals and businesses. TheAgreement also incorporates a number of important safeguards to protect the legitimate interests oftaxpayers, including requirements in relation to confidentiality and legal privilege.

7. Australia has signed 13 TIEAs, five of which have entered into force (Antigua and Barbuda,Bermuda, Isle of Man, Jersey, and Netherlands Antilles) and eight of which have yet to enter intoforce (Aruba, British Virgin Islands, the Cook Islands, Guernsey, Gibraltar, Samoa, San Marino andSt Kitts and Nevis). The Agreement with Guernsey is a part of Australia's efforts to concludeTIEAs with jurisdictions that have committed to work with Organisation for Economic Cooperationand Development (OECD) member countries to improve transparency and establish effectiveprocedures for the exchange of tax information

Reasons for Australia to take the proposed treaty action

8. The Agreement, alongside TIEAs with other countries, is an important tool in Australia'sefforts to combat offshore tax evasion. The Agreement provides for the effective exchange ofinformation between Australia and Guernsey, which will promote fairness and enhance Australia'sability to administer and enforce its domestic tax laws.

9. The Agreement is part of Australia's ongoing commitment to the OECD's work oneliminating harmful tax practices that contribute to international tax avoidance and evasion.Australia has taken a leadership role in this work and is currently the Chair of the Global Forum onTransparency and Exchange of Information for Tax Purposes, which has a membership of morethan 70 countries.

10. Since 2002, more than 40 low-tax jurisdictions, including Guernsey, have publiclycommitted to the implementation of OECD standards of transparency and information exchange fortax purposes, which have been endorsed by both the United Nations and the G-20. These standards,when implemented, ensure the availability of information needed by tax authorities to determine ataxpayer's correct tax liability. TIEAs are the key bilateral means that facilitate the provision ofsuch information by low-tax jurisdictions.

11. In April 2002, the OECD released a model TIEA to facilitate negotiations between OECDmember countries and committed jurisdictions. In October 2003, the then Australian Treasurerapproved an Australian model TIEA which is closely aligned to the OECD model. The Agreementwith Guernsey essentially follows the format of the Australian model TIEA.

12. Data held by the Australian Transaction Reports and Analysis Centre (AUSTRAC) indicatesa significant flow of funds between Australia and Guernsey . While most financial flows to andfrom low-tax jurisdictions are legitimate, the legal frameworks and systems that make low taxjurisdictions attractive for legitimate purposes may also be used in arrangements designed to evadepaying tax elsewhere . In particular, the use of secrecy laws to conceal assets and income that aresubject to Australian tax is of concern to Australia.

13. It is in Australia's interest to develop a network of TIEAs with low-tax jurisdictions. TheAgreement, along with existing and future TIEAs, will make it harder for taxpayers to avoid orevade Australian tax and discourage those taxpayers from participating in illegitimate taxarrangements by increasing the probability of detection. This will help Australia protect its revenuebase and improve the integrity of the tax system while enhancing Guernsey's reputation as alocation for legitimate business activity.

14. Guernsey's commitment to implement the Agreement is a positive step in its relationshipwith Australia. The OECD has issued a progress report on the implementation of internationallyagreed tax standards on the exchange of information, which identified Guernsey as a jurisdictionthat has substantially implemented these standards.

Obligations

15. Article 4(1) of the Agreement obliges the competent authorities of the Parties to provide, onrequest, information that is foreseeably relevant to the administration and enforcement of theParties' domestic tax laws, including the collection of taxes and the investigation or prosecution oftax matters. A request for information must be in writing and contain the details required by Article4(6). This obligation applies irrespective of whether the conduct being investigated wouldconstitute a crime under the domestic law of the requested Party if it occurred in the territory of that

Party.

16. Article 4(2) provides that where the information in the possession of the requested Party isinsufficient to enable compliance with a request, the requested Party must use its informationgathering powers to obtain and provide the information, even if it is not needed for the requestedParty's domestic tax purposes. This is consistent with Article 26 (Exchange of Information) of theOECD Model Convention with Respect to Taxes on Income and on Capital, which has beenincorporated into Australia's tax treaty policy.

17. Article 4(4) obliges the Parties to ensure that their competent authority is able, upon request,to obtain and provide information held by banks, other financial institutions and any person actingin an agency or fiduciary capacity, as well as information regarding the legal and beneficialownership of companies and partnerships and certain persons involved with trusts and foundations.The Commissioner of Taxation currently has the necessary legal authority to meet Australia'sobligations under Article 4(4).

18 Article 4(7) obliges the Parties to acknowledge receipt of requests for information and toprovide the requested information with the least possible delay.

19. Article 5 provides that one Party may, on request, permit interviews with individuals and theexamination of records within its jurisdiction by officials of the other Party, with the prior writtenconsent of the individuals or other persons concerned.

20. Article 6 provides various grounds for the refusal of requests, including where requests arenot in conformity with the Agreement or if the requesting Party would be unable to obtain therequested information under its own laws.

21. Article 7 obliges the Parties to keep information provided and received confidential. Suchinformation may be disclosed only to persons or authorities concerned with the administration andenforcement of taxation covered by the Agreement and may only be used for this purpose, althoughthis may include public court proceedings or in judicial decisions. The express written consent ofthe competent authority of the requested Party is required for the use of the requested informationfor any other purpose.

22. Article 8 obliges the requested Party to bear indirect costs associated with requests forinformation, while direct costs are to be borne by the requesting Party, unless the Parties otherwiseagree. Paragraph 29 outlines the financial impact of these obligations.

23. Article 9 obliges each Party to refrain from applying prejudicial or restrictive measures toresidents or nationals of the other Party on the basis that the other Party does not engage in effectiveexchange of information and/or because it lacks transparency in the operation of its laws,regulations or administrative practices. A prejudicial or restrictive measure includes the denial of adeduction, credit or exemption, the imposition of a tax, or special reporting requirements.

24. Article 10 requires the Parties to use their best efforts to resolve disputes concerning theapplication or interpretation of the Agreement by mutual agreement, and provides that they mayagree on other forms of dispute resolution should this become necessary.

Implementation

25. Australia is able to fulfil its obligations under the Agreement under existing legislation,specifically section 23 of the International Tax Agreements Act 1953. No further legislation orregulation is required in order to implement the Agreement.

26. The implementation of the Agreement will not affect the existing roles of theCommonwealth or the States and Territories in tax matters.

Costs

27. The Agreement will have a small administrative and financial impact on the AustralianTaxation Office (ATO). As Guernsey is unlikely to routinely need Australian information for itsown tax purposes, it is likely that most requests for information will originate from Australia. Someadditional resources may be required so that the ATO may provide technical assistance to Guernseyin relation to its exchange of information procedures, if necessary.

28. The ATO and the Director of Income Tax of Guernsey will conclude a Memorandum ofUnderstanding, under which certain costs associated with Australian requests for information willbe borne by the ATO. Examples of such costs, classified as extraordinary costs, include:

a) reasonable fees charged by third parties for carrying out research;b) reasonable fees charged by third parties for copying documents;c) reasonable costs of engaging experts, interpreters or translators;d) reasonable costs of conveying documents to Australia;e) reasonable litigation costs of Guernsey; andf) reasonable costs of obtaining depositions or testimony.

29. Australian residents are unlikely to incur significant compliance costs in relation to theAgreement. It is unlikely that Australia will receive many requests for information from Guernseyand therefore be required to collect information from Australian residents.

30. Overall, it is estimated that the administrative and financial impact of the Agreement will beabsorbed by the ATO's existing exchange of information programme, which currently administerssimilar arrangements with more than 40 countries. On a broader level, as the Agreement is intendedto help reduce tax avoidance and evasion by Australian taxpayers, its general impact could result inthe positive generation of revenue for Australia.

Regulation Impact Statement

31. The Treasury has assessed the implementation of the Agreement against criteria in the BestPractice Regulation Handbook and concluded that this regulatory option has no/low impact onbusinesses and individuals or on the economy. The Office of Best Practice Regulation wasconsulted and confirmed that a Regulation Impact Statement was not required.

Future treaty action

32. The Agreement does not provide for amendments or for the negotiation of future legallybinding instruments. In the absence of specific procedures, the Parties may amend the Agreementby mutual consent at any time. Any future amendments would be subject to the normal treatyprocess, including tabling and consideration by the Joint Standing Committee on Treaties (JSCOT).Any such amendments to the Agreement may be considered in line with Australian policy for TIEA

negotiations current at that time.

Withdrawal or denunciation

33. Article 12 provides that the Agreement shall remain in force until terminated by either Partyin writing. Termination would take effect on the first day of the month following the expiration ofthree months after the date of receipt of the notice of termination by the other Party. However, bothParties would remain bound by the confidentiality obligations contained in Article 7. This ensuresthe continued protection of information exchanged under the Agreement between the two Parties.

34. Termination by Australia would be subject to the normal treaty process, including tablingand consideration by JSCOT.

Contact details

International Tax and Treaties DivisionDepartment of the Treasury

ATTACHMENT ON CONSULTATION

Agreement between the Government of Australia and the States of Guernsey

for the Exchange of Information Relating to Tax Matters,done at London on 7 October 2009

[2009] ATNIF 25

CONSULTATION

35. The Agreement with Guernsey addresses only administrative matters, namely facilitating thefull exchange of information between tax authorities. Accordingly, the public was not consulted.

36. The ATO was consulted in the development of the Australian model TIEA and ATOofficials negotiated the text of the Agreement with Guernsey. The ATO will administer theAgreement once it is implemented.

37. In addition to the Assistant Treasurer, the Minister for Foreign Affairs, the Minister forTrade and the Prime Minister approved the treaty action.

DEPARTMENT OF FOREIGN AFFAIRS AND TRADE

CANBERRA

AGREEMENT BETWEEN

THE GOVERNMENT OF AUSTRALIA

AND

THE STATES OF GUERNSEY

FOR

THE ALLOCATION OF TAXING RIGHTS WITH RESPECT TO CERTAIN INCOME OFINDIVIDUALS

AND

TO ESTABLISH A MUTUAL AGREEMENT PROCEDURE IN RESPECT OF TRANSFERPRICING ADJUSTMENTS

(London , 7 October 2009)

Not yet in force

[2009] ATNIF 26

Agreement between the Government of Australia and the States of Guernsey for theAllocation of Taxing Rights with respect to Certain Income of Individuals and toestablish a Mutual Agreement Procedure in respect of Transfer Pricing Adjustments

The Government of Australia and the States of Guernsey ("the Parties"),

Recognising that the Parties have concluded an Agreement for the Exchange of Information

Relating to Tax Matters, and

Desiring to conclude an Agreement for the allocation of taxing rights with respect to certain income

of individuals and to establish a mutual agreement procedure in respect of transfer pricing

adjustments,

Have agreed as follows:

ARTICLE 1

PERSONS COVERED

This Agreement shall apply to persons who are residents of one or both of the Parties.

ARTICLE 2

TAXES COVERED

1 The existing taxes to which this Agreement shall apply are:

(a) in the case of Australia, the income tax imposed under the federal law of Australia;

(hereinafter referred to as "Australian tax");

(b) in the case of Guernsey:(i) income tax;(ii) dwellings profits tax;

(hereinafter referred to as "Guernsey tax").

2 This Agreement shall also apply to any identical or substantially similar taxes which are

imposed after the date of signature of this Agreement in addition to, or in place of, the existing

taxes. The competent authorities of the Parties shall notify each other within a reasonable period of

time of any substantial changes to the taxation laws covered by this Agreement..

3 This Agreement shall not apply to taxes imposed by states, municipalities, local authorities

or other political subdivisions, or possessions of a Party.

ARTICLE 3

DEFINITIONS

1 For the purposes of this Agreement, unless the context otherwise requires:

(a) "Australia", when used in a geographical sense, excludes all external territories other

than:

(i) the Territory of Norfolk Island;

(ii) the Territory of Christmas Island;

(iii) the Territory of Cocos (Keeling) Islands;

(iv) the Territory of Ashmore and Cartier Islands;

(v) the Territory of Heard Island and McDonald Islands; and

(vi) the Coral Sea Islands Territory,

and includes any area adjacent to the territorial limits of Australia (including the

Territories specified in this subparagraph) in respect of which there is for the time being

in force, consistently with international law, a law of Australia dealing with the

exploration for or exploitation of any of the natural resources of the exclusive economic

zone or the seabed and subsoil of the continental shelf;

(b) "Guernsey" means Guernsey, Alderney and Herm, including the territorial sea adjacent

to those islands, in accordance with international law;

(c) "competent authority" means in the case of Australia, the Commissioner of Taxation or

an authorised representative of the Commissioner and, in the case of Guernsey, the

Director of Income Tax or his delegate;

(d) "person" includes an individual, a company and any other body of persons;

(e) "tax" means Australian tax or Guernsey tax as the context requires; and

-2-

(f) "transfer pricing adjustment" means an adjustment made by the competent authority of

a Party to the profits of an enterprise as a result of applying the domestic tax law

concerning taxes referred to in Article 2 of that Party regarding transfer pricing.

2 As regards the application of this Agreement at any time by a Party, any term not defined

therein shall, unless the context otherwise requires, have the meaning that it has at that time under

the law of that Party, for the purposes of the taxes to which this Agreement applies, any meaning

under the applicable tax laws of that Party prevailing over a meaning given to the term under other

laws of that Party.

ARTICLE 4

RESIDENT

1 For the purposes of this Agreement , the term "resident of a Party" means:

(a) in the case of Australia , a person who is a resident of Australia for the purposes of

Australian tax; and

(b) in the case of Guernsey, a person who is a resident of Guernsey for the purposes of

Guernsey tax.

2 A person is not a resident of a Party for the purposes of this Agreement if the person is liable

to tax in that Party in respect only of income from sources in that Party.

3 Where by reason of the preceding provisions of this Article a person, being an individual, is

a resident of both Parties, then the person's status shall be determined as follows:

(a) the individual shall be deemed to be a resident only of the Party in which a permanent

home is available to that individual; if a permanent home is available in both Parties, or

in neither of them, that individual shall be deemed to be a resident only of the Party with

which the individual's personal and economic relations are closer (centre of vital

interests);

(b) if the Party in which the individual's centre of vital interests cannot be determined, the

individual shall be deemed to be a resident only of the Party in which the individual has

an habitual abode;

(c) if the individual has an habitual abode in both Parties, or in neither of them, the

competent authorities of the Parties shall settle the question by mutual agreement;

-3-

4 Where, by reason of paragraph 1, a person other than an individual is a resident of both

Parties, then it shall be deemed to be a resident only of the Party in which its place of effective

management is situated.

ARTICLE 5

GOVERNMENT SERVICE

1 (a) Salaries, wages and other similar remuneration paid by a Party or a political subdivision

or a local authority thereof to an individual in respect of services rendered to that Party

or subdivision or authority shall be taxable only in that Party.

(b) However, such salaries, wages and other similar remuneration shall be taxable only in

the other Party if the services are rendered in that Party and the individual is a resident

of that Party who:

(i) is a national or citizen of that Party; or

(ii) did not become a resident of that Party solely for the purpose of rendering the

services.

2 Notwithstanding the provisions of paragraph 1, salaries, wages and other similar

remuneration paid in respect of services rendered in connection with a business carried on by a

Party or political subdivision or a local authority thereof may be taxed in accordance with the laws

of a Party.

ARTICLE 6

STUDENTS

Payments which a student or business apprentice, who is or was immediately before visiting

a Party a resident of the other Party and who is temporarily present in the first-mentioned Party

solely for the purpose of their education or training, receives for the purpose of their maintenance,

education or training shall not be taxed in that Party, provided such payments arise from sources

outside that Party.

ARTICLE 7

MUTUAL AGREEMENT PROCEDURE IN RESPECT OF TRANSFER PRICING

ADJUSTMENTS

1 Where a resident of a Party considers the actions of the other Party result or will result in a

transfer pricing adjustment not in accordance with the arm's length principle, the resident may,

irrespective of the remedies provided by the domestic law of those Parties, present a case to the

competent authority of the first-mentioned Party. The case must be presented within three years of

the first notification of the adjustment.

2. The competent authorities shall endeavour to resolve any difficulties or doubts arising as to

the application of the arm's length principle by a Party regarding transfer pricing adjustments. They

may also communicate with each other directly for the purposes of this Article.

ARTICLE 8

EXCHANGE OF INFORMATION

The competent authorities of the Parties shall exchange such information as is foreseeably

relevant for carrying out the provisions of this Agreement. Information may be exchanged by the

competent authorities for the purposes of this Article in accordance with the provisions of the

Agreement for the Exchange of Information Relating to Tax Matters concluded by the Parties

(whether or not this Agreement, in whole or in part, forms part of the domestic law of either Party).

ARTICLE 9

ENTRY INTO FORCE

The Parties shall notify each other, in writing, through the appropriate channel of the

completion of their constitutional and legal procedures for the entry into force of this Agreement.

This Agreement shall enter into force on the thirtieth day after the date of the last notification and

shall, provided an Agreement for the Exchange of Information Relating to Tax Matters is in force

between the Parties, thereupon have effect:

(a) in respect of Australian tax, for any year of income beginning on or after the first day

of July in the calendar year next following the date on which this Agreement enters into

force; and

5

(b) in respect of Guernsey tax, for any year of charge beginning on or after the first day of

January in the calendar year next following the date on which this Agreement enters

into force.

ARTICLE 10

TERMINATION

1 This Agreement shall continue in effect indefinitely, but either of the Parties may, after the

expiration of 3 years from the date of its entry into force, give to the other Party written notice of

termination.

2 Such termination shall become effective:

(a) in respect of Australian tax, in the year of income beginning on or after the first day

of July in the calendar year next following the date on which the notice of termination is

given;

(b) in respect of Guernsey tax, for any year of charge beginning on or after the first day of

January in the calendar year next following the date on which the notice of termination

is given.

3 Notwithstanding the provisions of paragraphs 1 and 2, this Agreement shall, upon receipt of

written notice of termination of the Agreement for the Exchange of Information Relating to Tax

Matters between the Parties, terminate and cease to be effective on the first day of the month

following the expiration of a period of six months after the date of receipt of such notice.

IN WITNESS WHEREOF the undersigned, being duly authorised in that behalf by their

respective Parties, have signed this Agreement.

DONE at London, in duplicate, on this seventh day of October 2009.

FOR THE GOVERNMENT OF FOR THE STATES OFAUSTRALIA: GUERNSEY:

John Cecil Dauth LVO Lyndon TrottHigh Commissioner Chief Minister

6

7

DOCUMENTS TO BE TABLED ON 29 MARCH 2010:

National Interest Analysis [2010 ] ATNIA 11

with attachment on consultation

® Agreement between the Government of Australia and theStates of Guernsey for the Allocation of Taxing Rights withRespect to Certain Income of Individuals and to Establish aMutual Agreement Procedure in Respect of Transfer PricingAdjustments,done at London on 7 October 2009

[2009] ATNIF 26

NATIONAL INTEREST ANALYSIS: CATEGORY 2 TREATY

SUMMARY PAGE

Agreement between the Government of Australia and the States of Guernsey for theAllocation of Taxing Rights with Respect to Certain Income of Individuals and to

Establish a Mutual Agreement Procedure in Respect of Transfer Pricing Adjustments,done at London on 7 October 2009

[2009] ATNIF 26

Nature and timing of proposed treaty action

1. The proposed treaty action is to bring the Agreement between the Government ofAustralia and the States of Guernsey for the Allocation of Taxing Rights with Respect toCertain Income of Individuals and to Establish a Mutual Agreement Procedure in Respect ofTransfer Pricing Adjustments (the Agreement) into force. Pursuant to Article 9, theAgreement will enter into force on the thirtieth day after the date of the completion of anexchange of notifications through the appropriate channel between Australia and Guernseyestablishing that constitutional and legal procedures for entry into force have been completed.

2. The Agreement will then have effect:

a) in respect of Australian tax, for any year of income beginning on or after 1 July inthe calendar year following the date of entry into force; and

b) in respect of Guernsey tax, for any year of income beginning on or after 1 Januaryin the calendar year following the date of entry into force.

3. For example, if the Agreement enters into force during 2010, it will have effect inrespect of Guernsey tax from 1 January 2011, and Australian tax from 1 July 2011.

Overview and national interest summary

4. The Agreement provides for the allocation of taxing rights between Australia andGuernsey with respect to certain income of certain classes of individuals who are residents ofAustralia or Guernsey. This helps to prevent double taxation of the same income. It alsoestablishes a mechanism to assist in the resolution of disputes arising from transfer pricingadjustments made to taxpayers' income by the revenue authorities of Australia or Guernsey.The Agreement is consistent with provisions contained in Australia's comprehensive bilateraltax treaties.

5. Guernsey is a British Crown Dependency, located in the English Channel. It has alow-tax structure and is an internationally recognised offshore financial centre. Guernsey hasan entrustment from the United Kingdom to negotiate and sign the Agreement with Australia.

6. Detailed information on the level and type of economic activity between Australiaand Guernsey is not available. However, data held by the Australian Transaction Reports andAnalysis Centre indicates that a significant amount of funds flow between Australia andGuernsey.

7. The Agreement is part of a package of benefits offered to Guernsey as part ofnegotiations to conclude a Tax Information Exchange Agreement (TIEA) with Australia.That TIEA - the Agreement between the Government of Australia and the States of Guernsey

for the Exchange of Information Relating to Tax Matters - was signed simultaneously withthe Agreement on 7 October 2009. TIEAs are the bilateral means that facilitate the provisionof information by low-tax jurisdictions, and enhance Australia's ability to protect its revenuebase and improve the integrity of the tax system.

Reasons for Australia to take the proposed treaty action

8. The Agreement supports Australia ' s efforts to combat offshore tax evasion throughthe establishment of transparency measures and effective exchange of informationarrangements with low-tax jurisdictions. The Agreement was signed in conjunction with aTIEA between Australia and Guernsey on 7 October 2009.

9. Guernsey's commitment to implement the Agreement and the TIEA is a positivestep in its relationship with Australia. The Organisation for Economic Cooperation andDevelopment (OECD) has issued a progress report on the implementation of aninternationally agreed tax standard on the exchange of information, which identifiedGuernsey as a jurisdiction that has substantially implemented this standard.

Obligations

10. Article 1 provides that the Agreement applies only to persons who are residents (asdefined in Article 4) of Australia and/or Guernsey. This precludesnon-residents from obtaining the benefits of the Agreement. Pursuant to Article 4, a residentis a person who is a resident of Australia or Guernsey for taxation purposes. However, aperson is not a resident of a Party for the purposes of the Agreement if they are only liable totax -in that Party in respect of income from sources in that Party. For Australia, theAgreement only applies to federal income tax, and does not apply to State and Territory taxes(Article 2).

11. Under Articles 5 and 6 of the Agreement, each Party is obliged to forego its taxingrights over certain income derived by government employees, students and businessapprentices, where they are residents of the other Party.

12. Article 5 obliges Australia not to tax the salaries of government employees ofGuernsey working in government service in Australia. This would apply, for example, toGuernsey residents who staff representative offices established in Australia to provideinformation on investment opportunities in Guernsey. This approach provides Australia andGuernsey with sole taxing rights over the salaries that they pay to individuals undertakinggovernmental functions.

13. Article 6 obliges Australia not to tax maintenance, education or training paymentsreceived by students or business apprentices from Guernsey who are temporarily studying inAustralia, where those payments arise from sources outside Australia. Other income willremain liable to Australian tax as required under Australian law.

14. Article 7 establishes a mechanism to assist in the resolution of disputes arisingfrom transfer pricing adjustments made to taxpayers' income by the revenue authorities ofAustralia or Guernsey. Article 7 permits taxpayers affected by the actions of one Party topresent a case to the competent authority of the other Party and obliges Australia andGuernsey to endeavour to resolve such disputes. Affected taxpayers must invoke this processwithin three years of the first notification of the relevant adjustment.

15. Article 8 obliges the Parties to exchange information that is foreseeably relevantfor the purposes of carrying out the Agreement. Article 8 specifies that any information maybe exchanged pursuant to the provisions of the Agreement between the Government ofAustralia and the States of Guernsey for the Exchange of Information Relating Tax Matters,done at London on 7 October 2009.

Implementation

16. To give effect to the Agreement, minor amendments to the International Tax

Agreements Act 1953 will be necessary, including the insertion of the Agreement as aSchedule to that Act. Legislation for this purpose is expected to be introduced intoParliament in mid-2010. This legislation will be passed before the treaty is brought intoforce.

17. The implementation of the Agreement will not affect the existing roles of theCommonwealth or the States and Territories in tax matters.

Costs

18. The Agreement will have a financial impact on the Australian Taxation Office,which will administer it. However, the small number of taxpayers likely to be affected by theAgreement ensures that this impact will be minimal.

19. Affected Australian residents are unlikely to incur any significant compliance costsin relation to the Agreement, which may provide them with benefits.

20. Overall, it is estimated that the administrative and financial impact of concludingthe Agreement will be minimal and can be absorbed into existing administrativearrangements relating to Australia's bilateral comprehensive tax treaties.

Regulation Impact Statement

21. The Treasury has assessed the implementation of the Agreement against criteria inthe Best Practice Regulation Handbook and has concluded that this regulatory option hasno/low impact on businesses and individuals or on the economy. The Office of Best PracticeRegulation was consulted and confirmed that a Regulation Impact Statement was notrequired.

Future treaty action

22. The Agreement does not provide for amendments or for the negotiation of futurelegally binding instruments. In the absence of specific procedures, the Parties may amend theAgreement by mutual consent at any time. Any such amendments would be subject to thenormal treaty process, including tabling and consideration by the Joint Standing Committeeon Treaties (JSCOT). Any future amendments to the Agreement may be considered in linewith Australian policy for tax treaty negotiations current at that time.

Withdrawal or denunciation

23. Article 10(1) provides that the Agreement shall remain in force until terminated bywritten notice from either Party. Such notice may only be given after the expiration of threeyears from the date on which the Agreement entered into force.

24. Article 10(2) provides that such termination would take effect, in respect of

Australian tax, from 1 July in the calendar year following that in which the notice of

termination is given and , in respect of Guernsey tax, for any year of charge beginning on

1 January in the calendar year following that in which the notice of termination is given.

25. In addition , Article 10(3) provides that the Agreement will terminate and cease to

be effective six months after the receipt of notice from either Party terminating the relatedAgreement between the Government ofAustralia and the States of Guernsey for the Exchange

of Information Relating to Tax Matters.

26. Termination by Australia would be subject to the normal treaty process , including

tabling and consideration by JSCOT.

Contact details

International Tax Framework UnitDepartment of the Treasury

ATTACHMENT ON CONSULTATION

Agreement between the Government of Australia and the Government of theGuernsey for the Allocation of Taxing Rights with Respect to Certain Income of

Individuals and to Establish a Mutual Agreement Procedure in Respect of TransferPricing Adjustments,

done at London on 7 October 2009[2009 ] ATNIF 26

CONSULTATION

27. These negotiations with Guernsey were not in the public domain and, consequently,the public was not consulted.

28. The Australian Taxation Office (ATO) was consulted in the development of theAustralian model `additional benefits' Agreement, which was used as a basis for theAgreement, and ATO officials negotiated the text of the Agreement with the Guernsey. TheATO will administer the Agreement.

29. In addition to the Assistant Treasurer, the Minister for Foreign Affairs, the Ministerfor Trade and the Prime Minister have agreed to this treaty.