Income Tax Assessment Act 1936

PART III - LIABILITY TO TAXATION  

Division 11A - Dividends, interest and royalties paid to non-residents and to certain other persons  

Subdivision A - General  

SECTION 128A   INTERPRETATION  

128A(1)    

In this Division, unless the contrary intention appears:

ADI
means a body corporate that is an ADI (authorised deposit-taking institution) for the purposes of the Banking Act 1959 .

dividend :

(a) includes part of a dividend; and

(b) (except when used in paragraph (d) of the definition of interest in subsection (1AB)) does not include a dividend paid in respect of a non-equity share.

enterprise
means a business or other industrial or commercial undertaking.

entity
means:

(a) the Commonwealth, a State or an authority of the Commonwealth or of a State;

(b) a natural person;

(c) a company;

(d) the partners in a partnership, in their capacity as partners;

(e) the persons carrying on a joint venture, in their capacity as such persons; or

(f) the trustees of a trust, in their capacity as such trustees.

foreign bank
means a non-resident company that carries on a banking business.

interest
(Omitted by No 95 of 1997)

joint venture
means an enterprise carried on by 2 or more persons in common otherwise than as partners.

non-ADI financial institution
means a corporation that:

(a) is a registered entity within the meaning of the Financial Sector (Collection of Data) Act 2001 ; and

(b) is included in Category D (Money Market Corporation) in a list kept under section 11 of that Act; and

(c) carries on a general business of providing finance (within the meaning of that Act) on a commercial basis.

nostro account
means an account that:

(a) an ADI or non-ADI financial institution holds with a foreign bank and maintains for the sole purpose of settling international transactions; and

(b) operates on the basis that:

(i) amounts deposited in the account are held in the account for no more than 10 days; and

(ii) amounts advanced by way of an overdraft on the account are repaid within 10 days.

128A(1AA)    

In this Division and in an Act imposing withholding tax:

income
includes a royalty and a dividend.

128A(1AB)    

For the purposes of this Division:

interest
includes an amount:

(a) that is in the nature of interest; or

(b) to the extent that it could reasonably be regarded as having been converted into a form that is in substitution for interest; or

(c) to the extent that it could reasonably be regarded as having been received in exchange for interest in connection with a washing arrangement; or

(d) that is a dividend paid in respect of a non-equity share; or

(e) if regulations under the Income Tax Assessment Act 1997 are made having the effect that instruments known as upper tier 2 capital instruments, or a class of instruments of that kind, are debt interests - that is paid on such a debt interest and is not a return of an investment;

but does not include an amount to the extent to which it is a return on an equity interest in a company.

washing arrangement
means an arrangement under which the title to a security is transferred to a resident shortly before an interest payment is made where the sole or dominant purpose of the arrangement is to reduce the amount of withholding tax payable by a person.

128A(1AC)    
An example of an amount in the nature of interest is an amount representing a discount on a security.

128A(1AD)    
An example of an amount in substitution for interest is a lump sum payment made instead of payments of interest.

128A(1AE)    
For the purposes of this Division, if a lender assigns a loan, or the right to interest under a loan, any payment from the borrower to the assignee that represents an amount that would have been interest if the assignment had not taken place is taken to be a payment of interest.

128A(1AF)    
For the purposes of this Division, if a person acquires a security, or the right to interest under a security, any payment from the issuer of the security to that person that represents an amount that would have been interest if the acquisition had not taken place is taken to be a payment of interest.

128A(1A)    

Subject to subsection (1B), for the purposes of this subsection and sections 128AA , 128AB , 128AD , 128C , 128NA and 128NBA :

(a) a reference to the reduced issue price of a security that has been partially redeemed on one or more occasions is a reference to the issue price of the security reduced by the amount of the partial redemption or the sum of the amounts of the partial redemptions, as the case may be;

(b) expressions used in this subsection or those sections that are also used in Division 16E have the same respective meanings as in that Division; and

(c) sections 159GV (other than subsection 159GV(2) ) and 159GZ apply as if references in those sections to " this Division " were references to " subsection 128A(1A) and sections 128AA , 128AB , 128AD , 128C , 128NA and 128NBA " .

128A(1B)    

Subsection (1A) applies as if:

(a) paragraph (c) of the definition of qualifying security in subsection 159GP(1) were omitted; and

(b) paragraph (a) of the definition of security in that subsection included a reference to debt interests.

128A(2)    

For the purposes of this Division, interest or a royalty shall be deemed to have been paid by a person to another person although it is not actually paid over to the other person but is reinvested, accumulated, capitalized, carried to any reserve, sinking fund or insurance fund however designated, or otherwise dealt with on behalf of the other person or as the other person directs.

128A(3)    

For the purposes of this Division, a beneficiary who is presently entitled to a dividend, to interest or to a royalty included in the income of a trust estate shall be deemed to have derived income consisting of that dividend, interest or royalty at the time when he or she became so entitled.

128A(4)    

In section 260 , income tax or tax includes withholding tax.

128A(5)    

For the purposes of this Division:

(a) the borrowing of moneys by a company by means of the issue of a number of debentures or debt interests in one borrowing operation shall be deemed to be the raising of a loan;

(b) subject to paragraph (a), each receipt of moneys by a borrower under a contract under which moneys are to be, or may be, advanced by way of loan shall be deemed to be the raising of a loan; and

(c) the moneys received by the raising of a loan, less the expenses of borrowing, shall be deemed to be the loan moneys in respect of the loan.

128A(6)    

A reference in this Division to beneficial interests in relation to an entity shall be read:

(a) in the case of an entity being a company or the partners in a partnership - as a reference to beneficial interests in respect of the capital of, and in respect of any profits or income of, the company or partnership;

(b) in the case of an entity being persons carrying on a joint venture - as a reference to beneficial interests in respect of the enterprise; and

(c) in the case of an entity being the trustees of a trust - as a reference to beneficial interests under the trust.

128A(7)    

A reference in this Division to the use of moneys for the purposes of an enterprise shall be read as not including use of those moneys in the course of carrying on an enterprise:

(a) by way of providing capital for another enterprise; or

(b) by way of the making of loans.

128A(9)    

For the purposes of this Division:

(a) a reference to particular loan moneys (including the reference in paragraph (b)) includes a reference to moneys that, in the opinion of the Commissioner, represent those loan moneys; and

(b) without limiting the generality of paragraph (a):

(i) moneys received by way of repayment of a loan made out of particular loan moneys; and

(ii) moneys received in respect of shares in the capital of a company, being shares purchased or subscribed for by the expenditure of particular loan moneys, upon a sale of the shares, a return of capital by the company or liquidation of the company;

shall be deemed to represent those loan moneys.

128A(10)    

For the purposes of this Division, the trustee of a provident, benefit, superannuation or retirement fund is a non-resident at a particular time if, and only if, the fund is a foreign superannuation fund at that time.

128A(11)    

If, apart from this subsection, there is, in relation to a fund, no person who is a trustee of the fund for the purposes of this Division, the person, or each of the persons, who manages the fund is taken, for the purposes of this Division, to be the trustee, or a trustee, as the case requires, of the fund.