The announcement that the measure will not proceed does not preclude foreign governments and their investment bodies from continuing to claim sovereign immunity. That concession remains available but will continue to be applied in accordance with common law principles.
Examples of previous sovereign immunity rulings issued by the Tax Office can be seen on the Australian Taxation Office (ATO) website. These rulings provide some guidance as to how the principles apply but do not provide tax certainty in relation to future application of the rules to a particular taxpayer. Some of the key considerations concern the size of the investment in the underlying target and also whether the foreign government/investment body participates in the management of the target’s activities.
Sovereign immunity is an important tax concession where it is available. While the decision not to proceed with codification of the rules means there is a lack of certainty around the application of the principles and in any particular case, this uncertainty can be negated by obtaining a private binding tax ruling.