The International Tax Agreements Amendment Bill (No 1) 2008 was approved on September 15, 2008. The Bill, which was introduced into the House on August 27, 2008 amends the International Tax Agreements Act 1953 to give the force of law in Australia to a new tax treaty between Australia and Japan, which was signed in Tokyo earlier this year.

The new treaty, which replaces an existing treaty dating from 1969, was signed by the Australian Minister for Foreign Affairs, Stephen Smith and his Japanese counterpart, Masahiko Koumura in Tokyo on February 1.

The legislation now awaits approval from the Senate.

"The new treaty underlines the modern and sophisticated bilateral ties between Japan and Australia. It will enhance our important investment relationship, further assisting trade and investment flows, while reflecting current tax treaty policies and practices of the two countries," the two governments announced at the time in a joint media release.

The new treaty is designed to provide that dividends, interest and royalties paid from one country (the source country) to a person who is a resident in the other country will generally remain taxable in both countries, but with limits on the tax that the source country may charge on residents of the other country.

These changes are expected to reduce the cost to businesses of accessing intellectual property, equity and finance for expansion.

In turn, the new treaty reduces obstacles inhibiting further corporate expansion into Japan.

The new treaty also broadly updates taxation arrangements between Australia and Japan. This includes aligning capital gains tax treatment with Organisation for Economic Cooperation and Development (OECD) practice, and providing for improved integrity measures.