ARTICLE 3

General Definitions

Paragraph 1 defines some of the principal terms used throughout the Convention. Unless the context otherwise requires, the terms defined in this paragraph have a uniform meaning throughout. A number of other important terms are defined in other Treaty articles. For example, the term "resident" is defined in Article 4 (Residence), the term "permanent establishment" is defined in Article 5 (Permanent Establishment), and the term "royalties" is defined in Article 12 (Royalties).

The definitions of the terms "person", "company", "enterprise of a Contracting State", and "international traffic" are similar to the definitions in the U.S. Model.

The "competent authority" for the United States is the Secretary of the Treasury or his delegate, and for Australia the Commissioner of Taxation or his authorized representative.

The definitions of a United States corporation and an Australian corporation, respectively, exclude corporations which under the laws of the Contracting States are residents of both States. A corporation created and organized under the laws of a state of the United States is considered by the United States to be a United States corporation. Such a corporation could also be considered by Australia to be an Australian corporation if it is managed and controlled in Australia or if it does business there and its voting power is controlled by Australian resident shareholders. Typically, a corporation can avoid being a dual resident. If such a situation does arise, the dual resident corporation is not considered a resident of either country for purposes of the Treaty and is therefore not entitled to benefits granted by either State under the Treaty to residents of the other State.

The terms "United States" and "Australia" are defined to include the continental shelf areas of the two countries with respect to exploration and exploitation of their natural resources. For the United States, the definition of the continental shelf is interpreted in accordance with section 638 of the Internal Revenue Code and the regulations thereunder. The term "United States" does not include Puerto Rico, the Virgin Islands, Guam, or any other United States possession. The term "Australia" does include the Territories of Norfolk Island, Christmas Island, the Cocos Islands, Ashmore and Cartier Islands and the Coral Sea Islands; however, see also the discussion of paragraph 1(a)(iii) of Article 4 (Residence).

Definitions are provided for the terms "Contracting State," "State," "United States tax,'' ''Australian tax,'' and “resident of one of the Contracting States." The covered taxes do not include penalty or interest charges. For example, the ceiling rate of tax at source of 15 percent on dividends under Article 10 (Dividends) does not include any penalty or interest charge for late payment of tax.

Paragraph 2 provides that terms not defined in the Convention shall have the meaning which they have under the laws of the Contracting State concerning the taxes to which the Convention applies, unless the context of the Convention requires a different interpretation. Under the terms of Article 24 (Mutual Agreement Procedure), the competent authorities may agree on a common definition of an otherwise undefined term. The term "context" includes the purpose and background of the provision in which the term appears. An agreement by the competent authorities with respect to the meaning of a term used in the Convention would supersede conflicting meanings in the domestic laws of the Contracting States.