SCHEDULE 1
-
COLLECTION AND RECOVERY OF INCOME TAX AND OTHER LIABILITIES
History
Sch 1 inserted by No 178 of 1999 (as amended by No 179 of 1999 and No 44 of 2000).
Note: See section
3AA
.
Chapter 2
-
Collection, recovery and administration of income tax
History
Ch 2 title inserted by
No 73 of 2006
, s 3 and Sch 5 item 40, effective 1 July 2006.
PART 2-5
-
PAY AS YOU GO (PAYG) WITHHOLDING
Division 12
-
Payments from which amounts must be withheld
History
Div 12 (except s
12-190
) applies to a payment made on or after 1 July 2000.
Subdivision 12-H
-
Distributions of withholding MIT income
History
History
S 12-415 inserted by
No 79 of 2007
.
Subdiv 12-H heading substituted by No 53 of 2016, s 3 and Sch 6 item 38, effective 5 May 2016. For application provision, see note under Division
12A
heading. The heading formerly read
Subdivision 12-H
-
Distributions of managed investment trust income
Subdiv 12-H substituted by
No 32 of 2008
, s 3 and Sch 1 item 1, applicable to fund payments made in relation to the first income year starting on or after the first 1 July after 23 June 2008 and later income years. Subdivision 12-H formerly read:
Subdivision 12-H
-
Distributions of managed investment trust income to foreign residents
Guide to Subdivision 12-H
SECTION 12-375 WHAT THIS DIVISION IS ABOUT
A distribution to a foreign resident by managed investment trusts of their Australian sourced income and some capital gains may be subject to a single non-final withholding at the corporate tax rate. This includes distributions made to the foreign resident indirectly through one or more intermediaries, if relevant notices have been provided by payers.
Generally, the distribution must be made by the managed investment trust within 3 months after the end of its income year.
Division
6
of Part
III
of the
Income Tax Assessment Act 1936
does not apply to trustees and intermediaries to the extent that they have to withhold under this subdivision (see section
99G
of that Division).
History
S 12-375 inserted by
No 79 of 2007
, s 3 and Sch 10 item 1, applicable to the first income year starting on or after the first 1 July after the day on which
No 79 of 2007
receives the Royal Assent (ie 21 June 2007) and later income years.
Operative provisions
SECTION 12-380 OBJECT
12-380(1)
The object of this Subdivision is to implement a withholding regime to assist the collection of Australian tax on distributions of Australian sourced income by *managed investment trusts to foreign residents (directly, or indirectly through one or more *intermediaries).
12-380(2)
This regime overcomes information problems in applying alternative withholding regimes by:
(a)
providing for withholding at a flat rate
-
the *corporate tax rate; and
(b)
clarifying when withholding is required when payments are made via *intermediaries, which is commonly the case with distributions from *managed investment trusts.
Note:
Withholding other than at a flat rate would require managed investment trusts and intermediaries to know information about the foreign resident that they are unlikely to know.
History
S 12-380 inserted by
No 79 of 2007
, s 3 and Sch 10 item 1, applicable to the first income year starting on or after the first 1 July after the day on which
No 79 of 2007
receives the Royal Assent (ie 21 June 2007) and later income years.
SECTION 12-385 WITHHOLDING BY TRUSTEE OF MANAGED INVESTMENT TRUST
12-385(1)
The trustee of a *managed investment trust that makes a *fund payment in relation to an income year to an entity covered by section
12-410
must withhold an amount from the payment.
12-385(2)
The amount the trustee must withhold is:
| Amount of the *fund payment
×
*corporate tax rate |
History
S 12-385 inserted by
No 79 of 2007
, s 3 and Sch 10 item 1, applicable to the first income year starting on or after the first 1 July after the day on which
No 79 of 2007
receives the Royal Assent (ie 21 June 2007) and later income years.
SECTION 12-390 WITHHOLDING BY INTERMEDIARY
12-390(1)
An entity must withhold an amount from a payment (the
later payment
) it makes if:
(a)
the entity is an *intermediary in relation to a payment (the
earlier payment
) it received; and
(b)
all or some of the later payment (the
notice part
) is attributable to the part of the earlier payment that was covered by the notice the entity received in relation to the earlier payment; and
(c)
the later payment is made to an entity covered by section
12-410
.
Note:
Paragraph (1)(b) means that the notice part is attributable to a fund payment made by a managed investment trust, or 2 or more fund payments made by one or more managed investment trusts, to an intermediary.
12-390(2)
The amount the entity must withhold is:
| Notice part
×
*corporate tax rate |
History
S 12-390 inserted by
No 79 of 2007
, s 3 and Sch 10 item 1, applicable to the first income year starting on or after the first 1 July after the day on which
No 79 of 2007
receives the Royal Assent (ie 21 June 2007) and later income years.
SECTION 12-395 MEANING OF MANAGED INVESTMENT TRUST
12-395(1)
A trust is a
managed investment trust
in relation to an income year if:
(a)
the trustee of the trust makes the first *fund payment in relation to the income year; and
(b)
the conditions in this table are satisfied.
|
Conditions to be satisfied
|
|
Item
|
Condition
|
| 1 |
At the time the payment is made, or at an earlier time in the income year:
(a) the trustee was an Australian resident; or
(b) the central management and control of the trust was in Australia. |
| 2 |
At the time the payment is made, the trust is a managed investment scheme (as defined by section
9
of the
Corporations Act 2001
) and is operated by a financial services licensee (as defined by section
761A
of that Act) whose licence covers operating such a managed investment scheme. |
| 3 |
At the time the payment is made:
(a) units in the trust are listed for quotation in the official list of an *approved stock exchange in Australia; or
(b) the trust has at least 50 *members (ignoring objects of a trust); or
(c) one of the entities covered by a paragraph of subsection (2) is a member of the trust. |
12-395(2)
These are the entities:
(a)
a *life insurance company;
(b)
a *complying superannuation fund, a *complying approved deposit fund or a *foreign superannuation fund, being a fund that has at least 50 *members;
(c)
a trust for which the conditions in table items 1 and 2 in subsection (1), and the condition in paragraph (a) or (b) of table item 3, are satisfied;
(d)
an entity that is recognised, under a *foreign law relating to corporate regulation, as an entity with a similar status to a managed investment scheme and that has at least 50 members;
(e)
a trust:
(i)
interests in which are owned directly by an entity covered by an earlier paragraph; or
(ii)
interests in which are held indirectly by an entity covered by an earlier paragraph through a *chain of trusts;
where the conditions in table items 1 and 2 in subsection (1) are satisfied for the trust, or for each trust in the chain.
Exception: foreign resident individual having a substantial interest
12-395(3)
The condition in table item 3 in subsection (1) is not satisfied for a trust at a time if, at that time, one foreign resident individual, directly or indirectly:
(a)
held, or had the right to acquire, interests representing 10% or more of the value of the interests in the trust; or
(b)
had the control of, or the ability to control, 10% or more of the rights attaching to *membership interests in the trust; or
(c)
had the right to receive 10% or more of any distribution of income that the trustee may make.
Start-up phase
12-395(4)
A trust that is created during an income year is a
managed investment trust
in relation to the income year if, at the time the trustee of the trust makes the first *fund payment in relation to the income year, the conditions in table items 1 and 2 in subsection (1) are satisfied for the trust.
Wind-up phase
12-395(5)
A trust that ceases to exist during an income year is a
managed investment trust
in relation to the income year if:
(a)
at the time the trustee makes the first *fund payment in relation to the income year, the conditions in table items 1 and 2 in subsection (1) are satisfied for the trust; and
(b)
the trust was a *managed investment trust in relation to the previous income year otherwise than because of subsection (4).
History
S 12-395 inserted by
No 79 of 2007
, s 3 and Sch 10 item 1, applicable to the first income year starting on or after the first 1 July after the day on which
No 79 of 2007
receives the Royal Assent (ie 21 June 2007) and later income years.
SECTION 12-400 MEANING OF FUND PAYMENT
12-400(1)
The object of this section is to ensure that the total of the *fund payments that the trustee of a trust makes in relation to an income year equals, as nearly as practicable, the net income of the trust for the income year, disregarding these amounts (
excluded amounts
):
(a)
a dividend (as defined in Division
11A
of Part
III
of the
Income Tax Assessment Act 1936
) that is subject to, or exempted from, a requirement to withhold under Subdivision
12-F
;
(b)
interest (as so defined) that is subject to, or exempted from, such a requirement;
(c)
a *royalty that is subject to, or exempted from, such a requirement;
(d)
a *capital gain from a *CGT asset that is not *taxable Australian property;
(e)
amounts that are not from an *Australian source;
and disregarding deductions relating to excluded amounts.
12-400(2)
Work out as follows how much of a payment (the
actual payment
) made by the trustee of a trust in relation to an income year is a
fund payment
in relation to that year:
Method statement
Step 1.
Reduce the actual payment by so much of it that is attributable to excluded amounts.
Step 2.
Work out what it is reasonable to expect will be the *net income of the trust for the income year:
(a) disregarding excluded amounts, expected excluded amounts and deductions relating to those amounts; and
(b) on the basis that a *capital gain from *taxable Australian property of the trust that was or would be reduced under step 3 of the method statement in subsection 102-5(1) were double the amount it actually is.
Step 3.
The
fund payment
is so much of the step 2 amount as is reasonable having regard to:
(a) the object of this section; and
(b) the step 1 amount; and
(c) the amounts of any earlier *fund payments made by the trustee in relation to the income year; and
(d) the expected amounts of any later fund payments the trustee expects to make in relation to the income year.
12-400(3)
The expected *net income of the trust and the expected amounts of future *fund payments are to be worked out on the basis of the trustee
'
s knowledge when the actual payment is made.
12-400(4)
However, an amount is not a
fund payment
in relation to the income year unless it is paid:
(a)
during the income year; or
(b)
within 3 months after the end of the income year; or
(c)
within a longer period (starting at the end of the period referred to in paragraph (b) and not exceeding 3 months) allowed by the Commissioner.
12-400(5)
The Commissioner may allow a longer period as mentioned in paragraph (4)(c) only if the Commissioner is of the opinion that the trustee was unable to make the payment during the income year, or within 3 months after the end of the income year, because of circumstances beyond the influence or control of the trustee.
History
S 12-400 inserted by
No 79 of 2007
, s 3 and Sch 10 item 1, applicable to the first income year starting on or after the first 1 July after the day on which
No 79 of 2007
receives the Royal Assent (ie 21 June 2007) and later income years.
SECTION 12-405 MEANING OF INTERMEDIARY
12-405(1)
An entity is an
intermediary
in relation to a payment it receives at a time (the
receipt time
) if:
(a)
it is *carrying on a *business at the receipt time that consists predominantly of providing a custodial or depository service (as defined by section
766E
of the
Corporations Act 2001
) pursuant to an Australian financial services licence (as defined by section
761A
of that Act); and
(b)
it received the payment in the course of that business; and
(c)
before or at the receipt time, it received a notice of the kind referred to in section
12-415
in relation to the payment; and
(d)
either:
(i)
subsection (2) is satisfied for the entity at the receipt time; or
(ii)
the business is carried on at the receipt time through an *Australian permanent establishment.
12-405(2)
This subsection is satisfied for an entity at the receipt time if:
(a)
for a trust
-
at that time:
(i)
the trustee was an Australian resident; or
(ii)
the central management and control of the trust was in Australia; or
(b)
for another entity
-
the entity is an Australian resident at the receipt time.
History
S 12-405 inserted by
No 79 of 2007
, s 3 and Sch 10 item 1, applicable to the first income year starting on or after the first 1 July after the day on which
No 79 of 2007
receives the Royal Assent (ie 21 June 2007) and later income years.
SECTION 12-410 ENTITY TO WHOM PAYMENT IS MADE
12-410(1)
An entity (the
recipient
) is covered by this section for a payment made to it by another entity (the
payer
) if any of these conditions is satisfied when the payment is made:
(a)
the recipient is a foreign resident;
(b)
the payer believes, or has reasonable grounds to believe, that the recipient is a foreign resident;
(c)
the payer has no reasonable grounds to believe that the recipient is an Australian resident, and either:
(i)
the recipient has an address outside Australia (according to any record that is in the payer
'
s possession, or is kept or maintained on the payer
'
s behalf, about the transaction to which the payment relates); or
(ii)
the payer is authorised to make the payment at a place outside Australia (whether to the recipient or to anyone else);
(d)
the recipient has a connection outside Australia of a kind set out in the regulations.
12-410(2)
However, a recipient is not covered by this section for a payment if the recipient is an *intermediary.
History
S 12-410 inserted by
No 79 of 2007
, s 3 and Sch 10 item 1, applicable to the first income year starting on or after the first 1 July after the day on which
No 79 of 2007
receives the Royal Assent (ie 21 June 2007) and later income years.
SECTION 12-415 NOTICES
12-415(1)
An entity that makes a payment to another entity (the
recipient
) from which an amount would have been required to be withheld under this Subdivision if the payment had been made to an entity covered by section
12-410
may give the recipient a notice.
12-415(2)
The notice:
(a)
must specify that part of the payment from which an amount would have been so required to have been withheld; and
(b)
if that part is worked out by reference to a *discount capital gain
-
must specify the amount of that gain; and
(c)
must specify the income year of the *managed investment trust to which the relevant *fund payment relates.
12-415(3)
An *intermediary in relation to a payment cannot give a notice in relation to an amount:
(a)
that is a payment only because of section
11-5
; and
(b)
that is attributable (wholly or partly) to the first-mentioned payment.
Note:
Under section
11-5
, an entity is taken to have paid an amount to another entity if the first entity applies or deals with the amount on the other entity
'
s behalf or as the other entity directs.
History
S 12-415 inserted by
No 79 of 2007
, s 3 and Sch 10 item 1, applicable to the first income year starting on or after the first 1 July after the day on which
No 79 of 2007
receives the Royal Assent (ie 21 June 2007) and later income years.
SECTION 12-420 AGENCY RULES
12-420(1)
This Subdivision has effect as if a payment made to an entity in the capacity as agent for another entity (the
principal
) had been made to the principal.
12-420(2)
However, if the agent is an *intermediary in relation to the payment:
(a)
this Subdivision has effect as if the intermediary were not an agent in relation to the payment; and
(b)
for the purposes of this Subdivision, the receipt by the intermediary of the payment on behalf of the principal is not to be treated as a payment to the principal by any entity.
Note:
As a result of subsection (2), an agent intermediary may be required to withhold amounts under this Subdivision.
Subdiv 12-H inserted by
No 79 of 2007
, s 3 and Sch 10 item 1, applicable to the first income year starting on or after the first 1 July after the day on which
No 79 of 2007
receives the Royal Assent (ie 21 June 2007) and later income years.
Operative provisions
SECTION 12-405
MEANING OF
FUND PAYMENT
-
GENERAL CASE
12-405(1)
The object of this section is to ensure that the total of the *fund payments that the trustee of a trust makes in relation to an income year equals, as nearly as practicable, the net income of the trust for the income year, disregarding these amounts (
excluded amounts
):
(a)
a dividend (as defined in Division
11A
of Part
III
of the
Income Tax Assessment Act 1936
) that is subject to, or exempted from, a requirement to withhold under Subdivision
12-F
;
(b)
interest (as so defined) that is subject to, or exempted from, such a requirement;
(c)
a *royalty that is subject to, or exempted from, such a requirement;
(d)
a *capital gain or *capital loss from a *CGT event that happens in relation to a *CGT asset that is not *taxable Australian property;
(e)
amounts that are not from an *Australian source;
and disregarding deductions relating to excluded amounts.
12-405(1A)
This section applies to a trust that is
not
an *AMIT for an income year.
Note:
For the definition of
fund payment
in respect of a trust that is an AMIT for an income year, see section
12A-110
.
History
S 12-405(1A) inserted by No 53 of 2016, s 3 and Sch 3 item 10, effective 5 May 2016. For application provision, see note under Division
12A
heading.
12-405(2)
Work out as follows how much of a payment (the
actual payment
) made by the trustee of a trust in relation to an income year is a
fund payment
in relation to that year:
Method statement
Step 1.
Reduce the actual payment by so much of it that is attributable to excluded amounts, and increase it by any amounts to which subsection (2A) or (2B) applies for the income year (except to the extent that capital gains against which those amounts are applied are included in the actual payment made in relation to the income year).
Step 2.
Work out what it is reasonable to expect will be the *net income of the trust for the income year:
(aa) increasing the net income by any amounts to which subsection (2A) or (2B) applies for the income year; and
(a) disregarding (except to the extent that they are amounts to which subsection (2A) or (2B) applies for the income year) excluded amounts, expected excluded amounts and deductions relating to those amounts; and
(b) on the basis that a *capital gain from *taxable Australian property of the trust that was or would be reduced under step 3 of the method statement in subsection
102-5(1)
of the
Income Tax Assessment Act 1997
were double the amount it actually is.
Step 3.
The
fund payment
is so much of the step 2 amount as is reasonable having regard to:
(a) the object of this section; and
(b) the step 1 amount; and
(c) the amounts of any earlier fund payments made by the trustee in relation to the income year; and
(d) the expected amounts of any later fund payments the trustee expects to make in relation to the income year.
History
S 12-405(2) amended by No 15 of 2019, s 3 and Sch 1 items 25
-
27, by inserting
"
, and increase it by any amounts to which subsection (2A) or (2B) applies for the income year (except to the extent that capital gains against which those amounts are applied are included in the actual payment made in relation to the income year)
"
in step 1 of the method statement, inserting para (aa) in step 2 of the method statement and
"
(except to the extent that they are amounts to which subsection (2A) or (2B) applies for the income year)
"
in step 2 of the method statement, effective 1 April 2019 and applicable in relation to the 2018-19 income year and later income years.
12-405(2A)
If:
(a)
during an income year, a *capital loss from a *CGT event happens in relation to a *CGT asset that is not *taxable Australian property; and
(b)
in relation to that income year, some or all of the capital loss is applied against a *capital gain from a CGT event that happens in relation to a CGT asset that is taxable Australian property;
this subsection applies, for that income year, to the amount that is so applied.
History
S 12-405(2A) inserted by No 15 of 2019, s 3 and Sch 1 item 28, effective 1 April 2019 and applicable in relation to the 2018-19 income year and later income years.
12-405(2B)
If:
(a)
the trust has a *net capital loss for an income year; and
(b)
one or more of the *capital losses the trust made during that income year were from *CGT events that happened in relation to *CGT assets that were not *taxable Australian property; and
(c)
in relation to a later income year, some or all of the net capital loss is applied against a *capital gain from a CGT event that happens in relation to a CGT asset that is taxable Australian property;
this subsection applies, for the later income year, to an amount equal to so much of the net capital loss that is so applied as related to capital losses mentioned in paragraph (b).
History
S 12-405(2B) inserted by No 15 of 2019, s 3 and Sch 1 item 28, effective 1 April 2019 and applicable in relation to the 2018-19 income year and later income years.
12-405(3)
The expected *net income of the trust and the expected amounts of future *fund payments are to be worked out on the basis of the trustee
'
s knowledge when the actual payment is made.
12-405(4)
However, an amount is not a
fund payment
in relation to the income year unless it is paid:
(a)
during the income year; or
(b)
within 3 months after the end of the income year; or
(c)
within a longer period (starting at the end of the period referred to in paragraph (b) and not exceeding 3 months) allowed by the Commissioner.
12-405(5)
The Commissioner may allow a longer period as mentioned in paragraph
(4)(c)
only if the Commissioner is of the opinion that the trustee was unable to make the payment during the income year, or within 3 months after the end of the income year, because of circumstances beyond the influence or control of the trustee.
History
S 12-405 inserted by
No 32 of 2008
, s 3 and Sch 1 item 1, applicable to fund payments made in relation to the first income year starting on or after the first 1 July after 23 June 2008 and later income years.
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