Australia and Switzerland will begin discussions next month to update the existing tax treaty.

The discussions are part of the government's commitment to reducing barriers to cross-border investment and attracting overseas investment to Australia.

Switzerland is Australia's fifth largest source of foreign direct investment, amounting to $17.5 billion in 2009.

The Assistant Treasurer and Minister for Financial Services and Superannuation, the Hon Bill Shorten said, "The Australian government is committed to ensuring Australia's tax treaty network remains up to date to facilitate trade and investment, while also maintaining the integrity of the tax system.

"The Australian government will discuss with Switzerland ways to modernise all aspects of the existing treaty. A key aim of these negotiations will also be upgrading the tax information exchange arrangements,” he said.