The withholding rate is:
- 10% for interest payments
- 30% for unfranked dividend and royalty payments.
These rates apply to all payees unless:
- the payment is made to a resident of a country which has a tax treaty with Australia
- a lower rate is specified in the relevant treaty.
If this is the case, the lower treaty rate will apply.
Tax treaties are special agreements that Australia has entered into with over 40 countries and help prevent the same income being taxed more than once.
Joint accounts
If an account is held jointly by a resident and non-resident, the amount of withholding will depend on whether the resident quotes a tax file number (TFN) or Australian Business number (ABN).
If the resident does not quote a TFN or ABN or claim an exemption, the TFN/ABN withholding provisions apply to the total amount of interest or dividends payable to the joint account.
If the resident satisfies their TFN/ABN obligations, non-resident withholding applies to the total amount of interest or dividends paid.
Australian resident living overseas temporarily
If you are an investment body such as a financial institution and you have Australian resident payees who temporarily live overseas, the amounts you pay to those payees are not subject to foreign resident withholding tax if they:
- advise you that they continue to be Australian residents
- provide you with their TFN or ABN.
If they are Australian residents and have not provided their TFN or ABN, you must withhold at the top rate of tax.
See MIT withholding rules and What are tax treaties? for more information.