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The tie breaker where no one wins

The tie breaker where no one wins

James Macky explains why tie-breakers should be avoided in the event of an Australian multinational group that operates in a country subject to the Multilateral Instrument.

James Macky

Partner, Corporate Tax

KPMG Australia


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As a sports fan I love a good tie breaker, and there have been some thrilling ones of late – from Game 7 of the Stanley Cup finals, to Novak beating Roger at Wimbledon, to England winning the double-tie boundary-based Cricket World Cup final. 

But while tie-breakers can be thrilling, they should be avoided by Australian multinational groups that operate in a country subject to the Multilateral Instrument (MLI).

The MLI, which is more formally known as the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, is a multilateral treaty that enables countries to modify tax treaties without the ordinary ratification process.

The MLI entered into force on 1 January 2019, and over time is expected to apply to 32 of the 45 countries with which Australia has tax treaties. Japan, New Zealand and the UK are three of the countries where the modifications have already commenced, with withholding taxes being affected from 1 January 2019 and other taxes from 1 July 2019.

Prior to the MLI, a company that was a resident of Australia and the treaty partner jurisdiction under their respective laws would apply the treaty tie-breaker. In most treaties including those with New Zealand and the UK, this required the company to assess the location of the place of its effective management.


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