Luxembourg is one of Australia’s largest foreign investors and a major gateway for investment funds looking to enter Europe. Ahead of Luxembourg’s Minister of Finance Gilles Roth’s appearance at the 2026 ASFA Conference, Australia New Zealand Chamber of Commerce Luxembourg’s Maria Pawelek makes the case for Australia to consider a bilateral tax treaty.
Australia’s superannuation pool reached AUD 4.4 trillion at the March 2026 quarter, helped along by a substantial and growing share of institutional superannuation investment held offshore.
This money is invested in a range of assets, including European infrastructure, private credit and real estate, and accounts for more than 60% of Australia’s total net purchases of overseas portfolio equity in five of the past seven years.
As allocations shift from listed equities toward unlisted infrastructure, private credit and real assets, pooled European vehicles become more relevant to Australian institutional investors – and Luxembourg is the largest domicile for them.
Rapid investment growth makes for fast friends
In recent years, the financial relationship between Luxembourg and Australia has rapidly expanded. In 2025, the ‘Gibraltar of the North’ overtook Singapore to become Australia’s sixth-largest foreign investor with total investment stock of AU$164.7 billion
That figure represents a staggering 79% increase over the four years from 2021 – and growth of 23% through 2025 alone.
Despite this, no bilateral trade agreement currently exists between the two countries – placing Luxembourg alongside Hong Kong as the only two of Australia’s ten largest foreign investors to lack a comprehensive tax treaty.
What a tax treaty could change
A bilateral tax treaty could change the tax treatment and administrative requirements applying to investment between Australia and Luxembourg. By negotiating more favourable tax terms between Australia and Luxembourg, super funds could unlock a range of benefits.
1. Withholding tax that cannot be recovered
Cross-border dividends, interest and certain other payments may be subject to withholding tax at domestic rates in the source country. Depending on a fund’s tax position, the withholding may not be fully creditable or recoverable, in which case it becomes a permanent reduction in member returns rather than a timing difference.
A treaty could reduce or remove that tax. The Australia New Zealand Chamber of Commerce Luxembourg’s (ANZCCL) submission recommended that a treaty go further for retirement savings, with no dividend withholding on payments to pension and superannuation funds and reduced rates on interest. Australia already provides preferential withholding rates to recognised pension funds in a number of its treaties.
2. Recognition of fund vehicles
Institutional capital moves through pooled vehicles, so it matters whether a treaty allows the fund itself to claim benefits. Where a treaty contains no workable collective investment vehicle provision, entitlement to treaty benefits can turn on the position of the underlying investors, which is impractical for a widely held fund.
Australia’s recent treaties provide precedents allowing qualifying vehicles to claim treaty benefits at fund level, and the 2024 Luxembourg–United Kingdom treaty contains specific rules for Luxembourg collective investment vehicles. Recognition could also reduce tax and administrative friction where Australian superannuation funds invest through the Luxembourg pooled vehicles commonly used for infrastructure, private credit and real assets.
3. Certainty
A treaty can provide greater certainty around questions that funds currently have to price or avoid: whether using a manager in the other country creates a permanent establishment there, how capital gains on exit are treated, and how matters are resolved where both revenue authorities tax the same income, through a mutual agreement procedure.
Modern treaties also carry anti-avoidance provisions, which ANZCCL has argued should be framed so that they remain workable and avoid unnecessary complexity for widely held institutional funds that are already subject to regulation and investor-protection requirements.
What happens next
The ANZCCL Committee has made submissions to the Australian Treasury and the Luxembourg Ministry of Finance and met Australian Treasury officials. The Committee is now gathering case studies from organisations across the corridor, including a global custodian, a nature-based solutions manager and Australian institutional investors, to document in practical terms what the absence of a treaty costs and what an agreement would unlock.
The exercise is already identifying material additional allocations across infrastructure, natural capital and fund distribution. Treaty texts, once agreed, usually stand for decades, so the provisions settled in these negotiations will govern these flows well beyond the current investment cycle, and evidence from asset owners is most useful while the terms are still being framed.
ANZCCL would welcome further contributions to the case study programme from superannuation funds, whether a specific example, a structuring decision shaped by the absence of a treaty, or a view on what your fund would do differently were one in place. Please contact maria@anzccl.lu. Contributions can be de-identified, and confidentiality arrangements are available.
