NO.086

Australia and New Zealand will examine the tax treatment of trans Tasman investments,

the Australian Treasurer Peter Costello and the New Zealand Treasurer Michael Cullen

announced today.

Consideration will be given to the issue of ‘triangular taxation’.

This occurs where Australian shareholders in a New Zealand company operating in

Australia are unable to access Australian sourced franking credits, with the same problem

applying in reverse for New Zealand shareholders in Australian companies operating in New

Zealand.

Both Treasurers agree that the examination of triangular taxation is a worthwhile step

in addressing possible barriers to trans Tasman investment. In Australia the Ralph Review

of Business Taxation recommended an examination of triangular taxation.

Ministers have instructed officials in both countries to develop a workable model for

recognition of imputation credits in triangular cases, and assess the costs and benefits

of applying such a model. Officials are expected to report back on the issue by 30 June

2001. Business will be consulted during the development of the model. In Australia this

consultation will form part of the business tax reform process, and in New Zealand it will

form part of the normal generic tax policy process.

It is expected that today’s announcement of the examination of the triangular

issue will be reflected in the communiqu that issues from the Trade Ministers’

meeting in Auckland on 30-31 August 2000 to discuss ways of expanding and deepening Closer

Economic Relations cooperation.

CANBERRA 29 August 2000

CONTACT: James Kelly (Treasury)

(02) 6263 4450