COOLUM, Australia, Aug. 3 (Xinhua) -- Australia and Japan have agreed to revise a bilateral tax treaty in a bid to promote mutual trade and investment.

Australian Treasurer Peter Costello and Japanese Finance Minister Koji Omi on Friday announced the agreement at a joint press conference here on the sidelines of the Asia Pacific Economic Cooperation finance ministers meeting.

Costello said at the press conference that the new treaty is expected to improve investment flows between the two countries.

The new pact will comprehensively revise the existing agreement that was signed 38 years ago, and substantially reduce the withholding taxes imposed on dividends, interest and royalties paid between the two countries.

"In particular, it will eliminate withholding taxes on certain inter-company dividends, and certain interest," Costello said in an accompanying statement.

"This will provide long-term benefits for business, making it cheaper for Australian and Japanese business enterprises to obtain intellectual property, equity and finance for expansion," he said.

"These measures stipulated in the proposed new treaty are expected to enhance the already robust investment relationship between Australia and Japan and facilitate trade and investment flows between the two countries, while minimizing opportunities for tax avoidance," he added.

The new treaty will enter into force after it has been approved by the parliaments of the two countries and an official exchange of notes has taken place.