In a media release issued on 20 August 2009, the Assistant Treasurer, Senator Nick Sherry, announced that the Rudd Government will introduce amendments to the income tax law to formalise the existing tax practice of exempting certain income earned by foreign governments.
These changes will provide greater certainty to foreign governments investing in Australia as to the income tax treatment of "passive" investments. At present, such income is not taxed because of the doctrine of sovereign immunity. This doctrine exempts a foreign government's income from passive portfolio investments such as interest, dividends and managed funds distributions. Income from commercial activities will continue to be subject to Australian tax. The proposed changes will codify this existing practice.
"I intend to release draft legislation for public consultation as soon as practicable," the Assistant Treasurer said.
For a copy of the Minister's media release, No 2009/033, 20 August 2009, go here