INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)
View history note
Hide history noteThis section (except subsections (2D), (2DA) and (2E)) does not apply to a dividend, interest or a royalty paid after 30 June 2000.
Note:
Instead, see Subdivision 12-F in Schedule 1 to the Taxation Administration Act 1953 .
(a) the holder, or (if there is more than one holder) any holder, of a share or stock in a company that is a resident is shown, in relation to the share or stock, in the register of members of the company as having an address outside Australia; or
(b) the holder of a share or stock in a company that is a resident has authorized or directed the company to pay dividends in respect of the share or stock to himself, or to any other person, at a place outside Australia;
the company shall, subject to this section and to section 221YM , before or at the time when a dividend of the company is paid by the company in respect of the share or stock, make a deduction from the dividend of an amount determined in accordance with the regulations.
Subject to this section and to section 221YM , where:
(a) a dividend of a company that is a resident is paid to the Commonwealth, a State, an authority of the Commonwealth or of a State or a person in Australia (in this subsection referred to as ``the payee'' ); and
(b) another person who is a non-resident is entitled:
(i) to receive the dividend or a part of the dividend, or the amount of the dividend or of a part of the dividend, from the payee; or
(ii) to have the dividend or a part of the dividend, or the amount of the dividend or of a part of the dividend, credited to him, or otherwise dealt with on his behalf or as he directs, by the payee;
the payee shall, except as provided by the regulations, forthwith make a deduction from the dividend, or the part of the dividend, of an amount determined in accordance with the regulations.
Where interest is payable by a person, including the Commonwealth, a State or an authority of the Commonwealth or of a State (in this section referred to as ``the borrower'' ) to another person, or to other persons jointly, and:
(a) that other person, or one or more of those other persons, is or are shown, in relation to the transaction to which the interest relates, in or on any book, document or record in the possession of or kept or maintained on behalf of the borrower, as having an address outside Australia; or
(b) the borrower is authorized to pay the interest, either to the person or persons to whom it is payable or to another person or persons, at a place outside Australia,
the borrower shall, subject to this section and to section 221YM , before or at the time when the interest is paid by the borrower, make a deduction from the interest of an amount determined in accordance with the regulations.
Subject to this section and to section 221YM , where:
(a) interest is paid by a person to the Commonwealth, a State, an authority of the Commonwealth or of a State or a person in Australia (in this subsection referred to as ``the payee'' ); and
(b) another person who is a non-resident is entitled:
(i) to receive the interest or a part of the interest, or the amount of the interest or of a part of the interest, from the payee; or
(ii) to have the interest or a part of the interest, or the amount of the interest or of a part of the interest, credited to him, or otherwise dealt with on his behalf, or as he directs, by the payee,
the payee shall, except as provided by the regulations, forthwith make a deduction from the interest, or the part of the interest, of an amount determined in accordance with the regulations.
In subsection (2D), a reference to a relevant person is a reference to the Commonwealth, a State, an authority of the Commonwealth or of a State or a person who is, or persons at least 1 of whom is, a resident.
(a) interest is payable to a relevant person (in this subsection and in subsections (2E) and (2F) referred to as ``the lender'' ), by another person or other persons (in this subsection and in subsections (2E) and (2F) referred to as ``the borrower'' );
(b) the borrower is authorized to pay the interest to the lender, or to another person or other persons, at a place in Australia; and
(c) the interest so payable is derived by the lender in carrying on business in a country outside Australia at or through a permanent establishment of the lender in that country,
subsection (2E) applies in relation to that interest.
However, subsection (2E) does not apply in relation to the interest if the transaction in relation to which it is payable is entered into on or after 1 July 2000, unless the lender complied with paragraph (2E)(a) in relation to the interest before the transaction is entered into.
Note:
Instead, the lender must notify the borrower under section 12-260 in Schedule 1 to the Taxation Administration Act 1953 .
Where this subsection applies in relation to interest payable by a borrower to a lender:
(a) the lender shall:
(i) either before, or within 1 month after, entering into the transaction in relation to which the interest is payable; or
notify the borrower, in writing, that this subsection applies in relation to the interest; and
(ii) if the transaction was entered into before the date of commencement of this subsection - within 1 month after that date,
(b) the lender shall, forthwith after having so notified the borrower, furnish to the Commissioner particulars of the transaction, including the dates on which interest is payable to the lender by the borrower and the date on which the lender so notified the borrower.
Where a borrower has received a notification in accordance with subsection (2E) that that subsection applies in relation to interest payable by him to a lender, the borrower shall, subject to this section and to section 221YM , before or at any time when interest is paid by the borrower after the expiration of 1 month after receipt of that notification, make a deduction from the interest of an amount determined in accordance with the regulations.
If a royalty is payable by a person, including the Commonwealth, a State or an authority of the Commonwealth or of a State (the ``royalty payer'' ) to another person, or to other persons jointly, and:
(a) that other person, or one or more of those other persons, is or are shown, in relation to the transaction to which the royalty relates, in any book, document or record in the possession of or kept or maintained on behalf of the royalty payer, as having an address outside Australia; or
(b) the royalty payer is authorised to pay the royalty, either to the person or persons to whom it is payable or to another person or persons, at a place outside Australia;
the royalty payer must, subject to this section and to section 221YM , before or at the time when the royalty is paid by the royalty payer, make a deduction from the royalty of an amount determined in accordance with the regulations.
Subject to this section and to section 221YM , if:
(a) a royalty is paid by a person to the Commonwealth, a State, an authority of the Commonwealth or of a State or a person in Australia (the ``payee'' ); and
(b) another person who is a non-resident is entitled:
(i) to receive the royalty or a part of the royalty, or the amount of the royalty or of a part of the royalty, from the payee; or
(ii) to have the royalty or a part of the royalty, credited to him or her, or otherwise dealt with on his or her behalf, or as he or she directs, by the payee;
the payee must, except as provided by the regulations, immediately make a deduction from the royalty, or the part of the royalty, of an amount determined in accordance with the regulations.
A person is not required to make a deduction from a dividend, from interest or from a royalty under this section:
(a) if withholding tax is not payable in respect of the dividend, the interest or the royalty; or
(b) if an amount has, or amounts have, previously been deducted from the dividend, the interest or the royalty under this section and that amount, or the sum of those amounts, is not less than the withholding tax payable in respect of the dividend, the interest or the royalty.
For the purpose of determining whether a deduction is required to be made under subsection (2) in relation to an exempted dividend paid to the trustee of a trust, or a partnership, in which a non-resident holds an interest within the meaning of section 160AQZB or 160AQZC , the dividend is taken to have been franked in accordance with section 160AQFA to the extent of the lesser of:
(a) so much of the dividend as the non-resident is entitled to receive or to have credited to the non-resident, or otherwise dealt with on behalf of the non-resident or as the non-resident directs, by the trustee or partnership; and
(b) the exempted amount of the dividend.
Notwithstanding anything contained in the regulations made for the purposes of this section, a person is not required to make a deduction from a dividend, from interest or from a royalty under this section of an amount that exceeds the withholding tax payable in respect of the dividend, interest or royalty.
This section does not apply in relation to a dividend, or an amount of interest to which section 128AA , 128AC or 128AD applies, that is not paid in money or is not credited to a person.
This section does not apply in relation to a dividend or amount of interest from which a deduction is required to be made under subsection 221YHZC(1A) .
A person, other than the Commonwealth, a State or an authority of the Commonwealth or a State, who does not make a deduction from a dividend, from interest or from a royalty as required by this section is guilty of an offence punishable on conviction by a fine not exceeding $1,000.
Where a person (in this subsection referred to as the ``convicted person'' ) is convicted before a court of an offence against subsection (4A) in relation to the refusal or failure of the convicted person or another person to make a deduction from a dividend, from interest or from a royalty as required by this section, the court may, in addition to imposing a penalty on the convicted person, order the convicted person to pay to the Commissioner an amount not exceeding the amount of the deduction.
In this section, ``money'' includes postal orders, money orders, bills of exchange, promissory notes, drafts and letters of credit.
This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.