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 128AE   INTERPRETATION PROVISIONS RELATING TO OFFSHORE BANKING UNITS  

128AE(1)    

In this Division, unless the contrary intention appears:

borrow
includes raise finance by the issue of a security.

lend
includes provide finance by the purchase of a security.

OB activity
has the same meaning as in section 121D .

offshore banking unit
has the meaning given by this section.

offshore borrowing
means:

(a) a borrowing in any currency, by a person who is or has been an offshore banking unit, from a non-resident who is not a related person (within the meaning of Division 9A ); or

(b) a borrowing in a currency other than Australian currency, by a person who is or has been an offshore banking unit, from a resident or a related person (within the meaning of Division 9A ).

offshore gold borrowing
means borrowing gold from an offshore person within the meaning of section 121E .

offshore loan
(Omitted by No 191 of 1992)

prevailing borrowing rate
, in relation to a person who is or has been an offshore banking unit, in relation to a particular time, means the effective annual interest rate that the Commissioner considers was payable by the person on borrowings at or about that time or, where there were none, by offshore banking units generally at or about that time.

prevailing borrowing term
, in relation to a person who is or has been an offshore banking unit, in relation to a particular time, means the period that the Commissioner considers was the usual term of borrowings by the person at or about that time or, where there were none, by offshore banking units generally at or about that time.

security
means a bond, debenture, debt interest, bill of exchange, promissory note or other security or similar instrument.

tax exempt gold
means gold that is tax exempt gold under this section.

tax exempt loan money
means an amount that is tax exempt loan money under this section.

transfer to a person
includes apply an amount for the benefit of a person.

128AE(1A)    

The Minister must not make a declaration under subsection (2) , or a determination under subsection (2AA) , after the day on which the Treasury Laws Amendment (2021 Measures No. 2) Act 2021 received the Royal Assent.

128AE(2)    

The Minister may, by notifiable instrument, declare a person being:

(a)    

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

(b)    a public authority constituted by a law of a State, being a public authority that carries on the business of State banking; or

(ba)    

a company in which all of the equity interests are beneficially owned by an offshore banking unit (other than one to which paragraph (c) applies); or

(c)    a person whom the Minister is satisfied is appropriately authorised to carry on business as a dealer in foreign exchange; or

(d)    

a life insurance company registered under section 21 of the Life Insurance Act 1995 ; or

(e)    

a company incorporated under the Corporations Act 2001 that provides funds management services on a commercial basis (other than solely to related persons):

(i) that is, under the Financial Sector (Collection of Data) Act 2001 , a registered entity included in the category for money market corporations; or

(ii) all of the shares which are beneficially owned by a company covered by subparagraph (i) ; or

(iii) a financial services licensee (within the meaning of the Corporations Act 2001 ) whose licence covers dealing in securities (within the meaning of subsection 92(3) of that Act), providing financial advice in relation to such securities or operating a managed investment scheme (within the meaning of that Act); or

(f)    

a company that the Minister determines, in writing, to be an OBU under subsection (2AA) ;

to be an offshore banking unit for the purposes of this Division.

128AE(2AA)    

The Minister may, on written application by a company, determine, by notifiable instrument, that the company is an OBU.

128AE(2AB)    

The determination must:

(a)    specify the day when the company commences to be an OBU; and

(b)    contain any other information the Minister considers appropriate.

128AE(2AC)    

A determination of the Minister under subsection (2AA) must be made in accordance with guidelines determined by the Minister under subsection (2AD) .

128AE(2ACA)    
A determination under subsection (2AA) that a company is an OBU and a declaration under subsection (2) , for the purposes of paragraph (2)(f) , that the company is an offshore banking unit for the purposes of this Division may be included in the same instrument.

128AE(2AD)    

The Minister must, by legislative instrument, determine guidelines for the making of determinations under subsection (2AA) . The guidelines may require the Minister to take into account:

(a)    specified criteria; or

(b)    recommendations of particular bodies; or

(c)    any other factors.

128AE(2AE)    

(Repealed by No 58 of 2006 )

128AE(2A)    

If a person who is an offshore banking unit for the purposes of this Division:

(a)    

is convicted of an offence against section 8L , 8N , 8Q , 8T or 8U of the Taxation Administration Act 1953 , or against Division 136 or 137 of the Criminal Code in relation to a taxation law (within the meaning of the Taxation Administration Act 1953 ); or

(b)    incurs a tax liability, within the meaning of that Act, by way of a penalty equal to 90% of an amount;

the Minister may, by notifiable instrument, declare that the person is no longer an offshore banking unit for the purposes of this Division.

128AE(2B)    

If the Minister makes such a declaration in respect of a company that is an offshore banking unit only because of paragraph (2)(ba) , the offshore banking unit mentioned in that paragraph, and in any previous application of that paragraph that was necessary for it to apply to the company, is no longer an offshore banking unit from the time when the declaration comes into force.

128AE(2C)    

If a person who is an offshore banking unit ceases to be a person of a kind mentioned in any of paragraphs (2)(a) , (b) , (ba) and (c) , the Minister must, by notifiable instrument, declare that the person is no longer an offshore banking unit for the purposes of this Division.

128AE(2D)    

Except as mentioned in subsection (2A) , (2B) or (2C) , a person does not cease to be an offshore banking unit for the purposes of this Division.

128AE(3)    

A declaration under subsection (2) , (2A) or (2C) shall not come into force before the day on which the declaration is registered on the Federal Register of Legislation under the Legislation Act 2003 .

128AE(4)    

Where:

(a)    a person who is an offshore banking unit makes an offshore borrowing or offshore gold borrowing; and

(b)    the lender would, but for section 128GB , be liable to pay withholding tax on income consisting of interest on the offshore borrowing or offshore gold borrowing;

then, for the purposes of this Division, the amount borrowed is tax exempt loan money or tax exempt gold of the person.

128AE(5)    

Where:

(a)    

a person who is or has been an offshore banking unit makes a loan of tax exempt loan money or tax exempt gold where the loan is an OB activity or would be if the person were an OBU; and

(b)    the loan is repaid;

the amount repaid is, for the purposes of this Division, deemed to be tax exempt loan money or tax exempt gold of the person.

128AE(6)    
(Omitted by No 191 of 1992)

128AE(7)    

Where a person who is or has been an offshore banking unit transfers an amount of tax exempt loan money or tax exempt gold to another person, the following provisions have effect for the purposes of this Division:

(a)    subject to subsections (10) and (11) , the amount transferred ceases to be tax exempt loan money or tax exempt gold of the person; and

(b)    

the amount transferred does not become tax exempt loan money or tax exempt gold of the other person.

128AE(8)    

Where a person who is or has been an offshore banking unit transfers to another person an amount of money or gold that, in the opinion of the Commissioner, includes tax exempt loan money or tax exempt gold, so much of the amount transferred as the Commissioner considers was tax exempt loan money or tax exempt gold is deemed, for the purposes of this Division, to have been tax exempt loan money or tax exempt gold of the person.

128AE(9)    

Where a person who is or has been an offshore banking unit deals with an amount of tax exempt loan money or tax exempt gold of the person under the person ' s internal accounting arrangements in such a way that the amount becomes available for possible transfer to other persons (other than by way of payment in carrying on an OB activity, or what would be an OB activity if the person were an OBU, or repayment of an offshore borrowing or an offshore gold borrowing), the following provisions have effect for the purposes of this Division:

(a)    

the person is, when the amount so becomes available, deemed to make a transfer of the amount to another person, other than by way of payment in carrying on an OB activity (or what would be an OB activity if the person were an OBU) or repayment of an offshore borrowing or an offshore gold borrowing;

(b)    any actual transfer of the amount by the person to another person shall be disregarded.

128AE(10)    
For the purposes of this Division, where a person who is or has been an offshore banking unit transfers tax exempt loan money to another person in exchange for an equivalent amount in a different currency:

(a)    the amount received in exchange shall be taken to be the same money as was transferred; and

(b)    the transfer shall be taken not to have occurred.

128AE(11)    

For the purposes of this Division, where a person who is or has been an offshore banking unit transfers tax exempt loan money or tax exempt gold to another person by way of a deposit for the purposes of temporary safe-keeping pending the making of an offshore loan or repayment of an offshore borrowing or an offshore gold borrowing:

(a)    the amount held on deposit and upon being repaid shall be taken to be the same money as was transferred; and

(b)    the transfer shall be taken not to have occurred.

128AE(12)    
For the purposes of this section, an amount:

(a)    deposited in an account with a bank or other financial institution; or

(b)    paid by way of consideration for the issue of a security;

shall be taken to have been lent to, and borrowed by, the bank, financial institution or issuer of the security.

128AE(13)    

If an offshore banking unit consists of:

(a)    one or more permanent establishments in Australia at or through which the offshore banking unit carries on what are OB activities within the meaning of Division 9A ; and

(b)    one or more other permanent establishments either in Australia or outside Australia;

then this section and section 128NB apply as if:

(c)    the offshore banking unit consisted only of the permanent establishments referred to in paragraph (a) ; and

(d)    the permanent establishments referred to in paragraph (b) were separate persons.