The ATO has released updated guidance on 11 June 2026 clarifying how private equity investors and other ultimate investors in fiscally transparent entities must substantiate treaty residency claims, requiring primary evidence such as tax identification forms and official residency certifications rather than statutory declarations, with no relief based on minority holding percentages.
The Australian Taxation Office (ATO) has released updated guidance on 11 June 2026 clarifying how residency under double tax agreements can be demonstrated in structures involving fiscally transparent entities.
Fiscally transparent entities and tax treaty residency claims
How to evidence double tax agreement (DTA) residency in arrangements involving fiscally transparent entities (FTEs).
What are fiscally transparent entities
An entity is a fiscally transparent entity (FTE) where, under the domestic law of a contracting state, the profits (or part of them) of the entity or arrangement isn’t taxed at the level of the entity or the arrangement, and it’s instead taxed at the level of the persons who have an interest in that entity or arrangement (ultimate investors).
In private equity investments, common entities that may be treated as FTEs for tax purposes in some contracting states include limited partnerships, as well as US-incorporated limited liability companies.
Private capital programme’s approach to private equity
The private capital programme (PCP) is funded by the Tax Avoidance Taskforce. The PCP’s work seeks to give the community confidence that the largest public and multinational groups involved in Australian private capital investments are paying the right amount of tax.
The establishment of a dedicated programme recognises the scale of private capital investment in Australia, as well as the unique features and the tax issues related to the entities and structures that are often used.
The PCP’s approach to private equity investment focuses on global private equity firms and their associated participants, including the funds and their investors, as well as the Australian targets.
For more information, see Private equity.
Substantiating DTA residency for FTEs
Ultimate investors in an FTE or an arrangement may be eligible for treaty benefits under some of Australia’s double tax agreements (DTAs).
Where a DTA facilitates this, ATO requires evidence that ultimate investors in the arrangement are residents of the country with which Australia has the relevant DTA.
The ultimate investors of an FTE are the entities to which the income derived by or through the FTE is allocated as their income for income tax purposes in their country of residence and they are liable to tax as a resident on that income.
Primary evidence requirement
The ATO expects the evidence regarding the residency of interest holders of FTEs in private equity arrangements to largely be primary evidence.
In this regard, it considers that statutory declarations, statements under penalty of perjury or their equivalents are insufficient to substantiate residency.
At a minimum, ATO expects the following primary evidence to be kept and produced on request for each ultimate investor for which a DTA claim is being made:
1. Tax identification forms which show the:
- name of the entity
- type of entity
- treatment of each entity involved in the structure under the jurisdiction of the ultimate investors’ domestic tax law.
2. Certification of residency issued by the tax authorities of the relevant country which demonstrates residency of an entity for domestic tax law purposes.
Where the above are not sufficient to substantiate residency of an interest holder for DTA purposes, ATO may also request the following, among other documents:
3. Incorporation documents.
4. Tax returns (whether foreign or domestic).
The above evidence is applicable to each ultimate investor. There is no de minimis for ultimate investors by reason of their holding percentage in an Australian target.
FTE keeping records of the ultimate investors
Where an FTE deriving Australian-sourced income is keeping records of its ultimate investors, ATO expects a spreadsheet setting out the information listed below to be produced by or on behalf of this FTE. This is an initial step to demonstrate satisfaction of the DTA residency requirement.
Provide a list, links or copies of the primary evidence for each of the following items:
- name of the investor(s) holding an interest in the FTE
- investor(s) entity type (for example, limited partnership, limited liability corporation)
- investor(s) entity, or entities’, country of establishment or incorporation
- investor(s) share (%) of the FTEs income
- name(s) of the ultimate investor(s)
- ultimate investor(s) country, or countries, of tax residence
- ultimate investor(s) country of DTA residence
- treatment of the income derived by or through the FTE under the jurisdiction of the ultimate investors’ domestic tax law.
Where only a portion of the income for which DTA benefits are being claimed demonstrably satisfies the DTA residency requirement under the applicable DTA or DTAs, DTA benefits will only be granted on this portion of the income if the ultimate investor also satisfies the other requirements under the relevant DTA.
