We are focused on ensuring taxpayers are aware of their withholding tax obligations. Taxpayers who've paid interest, dividends, or royalties to a non-resident may need to meet certain withholding tax requirements that include:
- lodgment of a PAYG annual report (PAYG withholding from interest, dividend and royalty payments paid to non-residents – annual report) or annual investment income report
- payment of withholding tax.
You may still have a withholding tax obligation even if the interest amount has not been actually paid. Learn when to withhold from interest, dividends and royalties to a non- resident.
What you need to know
If withholding tax obligations apply, ensure you:
- lodge a PAYG annual report or an annual investment income report
- withhold and pay the correct amount having regard to the impact of any applicable tax treaties and withholding tax exemptions
- withhold and pay on a timely basis having regards to whether you are a small, medium or large withholder
- where you are required to withhold, only claim a deduction where you have met your withholding tax obligations
- classify and report deductions for payments subject to withholding to a non-resident at the correct label in the income tax return and international dealings schedule
- satisfy the eligibility criteria to claim, and can substantiate an exemption under, section 128F or section 128FA of the ITAA 1936 including meeting the eligibility requirements of the public offer test
- satisfy the eligibility criteria to claim and can substantiate an exemption for superannuation funds for foreign residents under paragraph 128B(3)(jb) of the ITAA 1936
- satisfy the eligibility criteria to claim and can substantiate tax treaty relief
- consider whether you have entered into an arrangement covered by:
- Taxpayer Alert TA 2018/4 Accrual deductions and deferral or avoidance of withholding tax
- Taxpayer Alert TA 2020/3 Arrangements involving interposed offshore entities to avoid interest withholding tax
- Taxpayer Alert TA 2022/2This link will download a file Treaty shopping arrangements to obtain reduced withholding tax rates
For more information, refer to:
- Taxation Determination TD 93/146 Income tax: should a resident deduct withholding tax from interest payable under a loan from a non-resident if there is no actual payment of the interest?
- Investment income and royalties paid to foreign residents
- Non-resident withholding tax – interest, dividend or royalty
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