Australia’s existing DTAs incorporate many similar concepts such a 'permanent establishment' and have definitions of other terms also found in the Income Tax Assessment Act but that are specific to the relevant DTA. Many such definitions and indeed the composition of many articles in the DTAs are very similar and hence there can be a presumption that many DTAs apply to the same types of transactions in the same way. Often however the unwary can be caught out by subtle differences in DTA drafting that substantially alters the presumed outcome of a transaction.
The recent Federal court case of Task Technology Pty Ltd v Commissioner of Taxation  FCA 38 has highlighted the relevance of such subtle differences. The case, which is being appealed, examines the application of Article 12(7) of the Australia/Canada DTA which, broadly stated, excludes a payment from being a royalty where it is in consideration for the right to use source code in a computer software program provided the right is limited to such use as is necessary to enable the effective operation of the computer program. This sub-article is specific to the DTA with Canada and a number of Australia’s DTAs have other specific sub-articles or definitions that can alter the outcome of what constitutes a royalty. Careful consideration of each DTA is always warranted.