The Australian Taxation Office (ATO) has updated the guidelines for the mutual agreement procedure (MAP) and arbitration arrangements. The updated guidelines reflect modifications made (or to be made) in some of Australia’s tax treaties made under the “multilateral instrument” (MLI).

MAP

Within the international tax system, the mutual agreement procedure (MAP) in Australia’s tax treaties supports a resilient global economy and facilitates economic growth. MAP can help relieve double taxation and resolve treaty-related tax disputes and issues in interpreting or applying a tax treaty.

MAP provides a bilateral mechanism for the Australian competent authority (CA) to engage with the CA of another jurisdiction.

The ATO has committed to the OECD’s recommended average timeframe of two years to resolve MAP cases. Most of Australia’s tax treaties state that any MAP agreement will be implemented despite any domestic time limits.

If a treaty does not include this, time limits under domestic law apply. Time frames can be extended in some circumstances.

Arbitration

Australia has adopted mandatory binding arbitration under Part VI of the MLI. The extent of availability of arbitration in Australia’s tax treaties modified by the MLI will depend on the finalized Part VI adoption positions taken by Australia and its treaty partner.

Based on other jurisdictions’ known adoption positions, it is expected that 16 of Australia’s tax treaties will eventually be modified by the MLI to provide for mandatory binding arbitration. Australia’s current tax treaties with Germany and Switzerland already provide for arbitration and will not be modified by the MLI.