Commonwealth Numbered Acts Commonwealth Numbered ActsPart 1 -- Main amendments
Taxation Administration Act 1953
1 At the end of Division 12 in Schedule 1
Add:
Subdivision 12‑H -- Distributions of managed investment trust income to foreign residents
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).
Table of sections
Operative provisions
12‑380 Object
12‑385 Withholding by trustee of managed investment trust
12‑390 Withholding by intermediary
12‑395 Meaning of managed investment trust
12‑400 Meaning of fund payment
12‑405 Meaning of intermediary
12‑410 Entity to whom payment is made
12‑415 Notices
12‑420 Agency rules
(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).
(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.
12‑385 Withholding by trustee of managed investment trust
(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.
(2) The amount the trustee must withhold is:
12‑390 Withholding by intermediary
(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.
(2) The amount the entity must withhold is:
12‑395 Meaning of managed investment trust
(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.
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Conditions to be satisfied |
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Item |
Condition |
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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. |
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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. |
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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. |
(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
(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
(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
(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).
12‑400 Meaning of fund payment
(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.
(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.
(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.
(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.
(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.
12‑405 Meaning of intermediary
(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.
(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.
12‑410 Entity to whom payment is made
(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.
(2) However, a recipient is not covered by this section for a payment if the recipient is an * intermediary.
(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.
(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.
(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.
(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.
(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.
2 At the end of Subdivision 18‑A in Schedule 1
Add:
Entitlement to credit: amount attributable to fund payment
18‑50 Credit: amount attributable to fund payment
(1) This section applies to an entity if:
(a) the entity is a beneficiary of a trust and the assessable income of the entity for an income year includes an amount (the assessable amount ) under section 97, 99F or 100 of the Income Tax Assessment Act 1936 ; or
(b) the entity is a trustee of a trust and is assessed and is liable to pay tax under section 99 or 99A of that Act on an amount (also the assessable amount ) for an income year;
and an assessment has been made of the income tax payable by the entity for the income year.
(2) The assessable amount includes any amount included in the assessable income of the beneficiary because of subsection 115‑215(3) of the Income Tax Assessment Act 1997 .
(3) The entity is entitled to a credit if the assessable amount is represented by or reasonably attributable to a * withholding payment from which an amount was withheld under Subdivision 12‑H (about distributions to foreign residents from managed investment trusts).
(4) The amount of the credit is worked out using the formula:
where:
"attributable part of the payment" is so much of the assessable amount as is represented by or reasonably attributable to the * withholding payment.
(5) Paragraph (1)(a) does not apply to a beneficiary of a trust in relation to an amount included in the beneficiary's assessable income under section 97 of the Income Tax Assessment Act 1936 if the beneficiary has the amount included in the capacity of a trustee of another trust.
(6) However, subsection (5) does not stop paragraph (1)(a) applying to a trustee of:
(a) a * complying superannuation fund, a * non‑complying superannuation fund, a * complying approved deposit fund, a * non‑complying approved deposit fund or a * pooled superannuation trust; or
(b) a * corporate unit trust; or
(c) a * public trading trust.
Part 2 -- Consequential amendments
Income Tax Assessment Act 1936
3 Subsection 6(1)
Insert:
"fund payment" has the same meaning as in the Income Tax Assessment Act 1997 .
4 Subsection 6(1)
Insert:
"intermediary" has the same meaning as in the Income Tax Assessment Act 1997 .
5 Subsection 6(1)
Insert:
"managed investment trust" has the same meaning as in the Income Tax Assessment Act 1997 .
6 Before section 100
Insert:
99F Assessable income includes amounts attributable to fund payments
If a beneficiary of a trust estate who is presently entitled to a share of the income of the trust estate:
(a) is a non‑resident at the end of the year of income; and
(b) is not, in respect of that share, a beneficiary in the capacity of a trustee of another trust estate;
the assessable income of the beneficiary includes so much of the individual interest of the beneficiary in the net income of the trust estate as is represented by or reasonably attributable to an amount from which an entity is required to withhold an amount under Subdivision 12‑H in Schedule 1 to the Taxation Administration Act 1953 .
99G Payments covered by withholding requirement
(1) Sections 98, 99 and 99A do not apply to so much of the net income of a trust estate of a year of income as:
(a) represents income to which a beneficiary is presently entitled; and
(b) is represented by or reasonably attributable to an amount from which an entity is required to withhold an amount under Subdivision 12‑H in Schedule 1 to the Taxation Administration Act 1953 .
(2) Subsection 98(4) does not apply to so much of the net income of a trust estate as represents income to which a beneficiary is presently entitled and gives rise to an amount from which an entity is required to withhold an amount under that Subdivision.
(1) This section applies if:
(a) a beneficiary of a trust estate that is a managed investment trust is presently entitled to a share of the income of the trust estate of a year of income; and
(b) the beneficiary is a non‑resident at the end of the year of income; and
(c) all or part of that share of the net income of the trust estate (the late amount ) has not been paid to the beneficiary by the end of the period applicable under subsection 12‑400(4) in Schedule 1 to the Taxation Administration Act 1953 ; and
Note: That subsection requires payments to be made before the end of 3 months after the end of the relevant year of income or within a longer period allowed by the Commissioner.
(d) if the late amount had been paid to the beneficiary within that period, the payment would have been a fund payment made by the trustee of the managed investment trust.
(2) This Division applies as if that portion of the beneficiary's income that represents the late amount were income to which no beneficiary was presently entitled.
(3) In working out the net income of the trust estate for the year of income for the purposes of subsection (1), disregard these amounts ( excluded amounts ):
(a) a dividend (as defined in Division 11A of Part III) that is subject to, or exempted from, a requirement to withhold under Subdivision 12‑F in Schedule 1 to the Taxation Administration Act 1953 ;
(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 a source in Australia;
and disregard deductions relating to excluded amounts.
7 Before subsection 100(2)
Insert:
(1C) If a beneficiary in a trust estate who is under a legal disability or is deemed to be presently entitled to any of the income of the trust estate by virtue of the operation of subsection 95A(2):
(a) is a resident at the end of the year of income; and
(b) is not a beneficiary in any other trust estate and does not derive income from any other source;
the assessable income of the beneficiary includes so much of the individual interest of the beneficiary in the net income of the trust estate as is represented by or reasonably attributable to a payment from which an entity was required to withhold an amount under Subdivision 12‑H in Schedule 1 to the Taxation Administration Act 1953 .
Note: A credit is available under section 18‑50 in Schedule 1 to the Taxation Administration Act 1953 for an appropriate part of the amount withheld.
8 Paragraph 202EE(1)(c)
After "Subdivision 12‑F", insert "or 12‑H".
9 Subsection 255(2A)
After "natural resource payments)", insert "or Subdivision 12‑H in that Schedule (about distributions to foreign residents from managed investment trusts)".
Income Tax Assessment Act 1997
10 At the end of paragraph 115‑215(2)(b)
Add:
; or (iv) under section 99F of that Act.
11 Subsection 995‑1(1)
Insert:
"fund payment" has the meaning given by section 12-400 in Schedule 1 to the Taxation Administration Act 1953 .
12 Subsection 995‑1(1)
Insert:
"intermediary" has the meaning given by section 12-405 in Schedule 1 to the Taxation Administration Act 1953 .
13 Subsection 995‑1(1)
Insert:
"managed investment trust" has the meaning given by section 12-395 in Schedule 1 to the Taxation Administration Act 1953 .
Taxation Administration Act 1953
14 Subsection 10‑5(1) in Schedule 1 (at the end of the table)
Add:
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25 |
A payment by a managed investment trust |
12‑385 |
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26 |
A payment by an intermediary |
12‑390 |
15 Subsection 12‑5(2) in Schedule 1 (before table item 1)
Insert:
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1AA |
section 12‑385 or 12‑390 |
distributions to foreign residents from * managed investment trusts |
each other withholding provision |
16 Subsection 15‑15(1) in Schedule 1
After "or 12‑145", insert "or Subdivision 12‑H".
17 Subsection 15‑15(1) in Schedule 1 (at the end of the note)
Add "Subdivision 12‑H is about distributions to foreign residents from managed investment trusts (except dividends, interest and royalties).".
18 Subsection 15‑35(1) in Schedule 1
After "section 12‑325", insert ", 12‑385 or 12‑390".
19 After subsection 16‑153(3) in Schedule 1
Insert:
(4) An entity must give a report to the Commissioner in the * approved form if the entity is required to withhold amounts under Subdivision 12‑H in relation to * fund payments made by a particular * managed investment trust (the paying trust ) in relation to an income year of that trust.
Note: The entity may be the managed investment trust itself or an intermediary.
(4A) The report under subsection (4) must be given:
(a) not later than 14 days after the end of 6 months after the end of the income year of the * managed investment trust in relation to which the relevant * fund payments were made; or
(b) within a longer period allowed by the Commissioner.
20 Paragraph 16‑155(1)(a) in Schedule 1
Omit "or 12‑317", substitute ", 12‑317, 12‑385 or 12‑390".
21 After section 16‑155 in Schedule 1
Insert:
16‑157 Payment summary for Subdivision 12‑H
(1) An entity (the payer ) must give a * payment summary to another entity (the recipient ) if the payer made * withholding payments covered by section 12‑385 or 12‑390 to the recipient in relation to * fund payments made by a particular * managed investment trust (the paying trust ) in relation to an income year of that trust.
Note: The entity may be the managed investment trust itself or an intermediary.
(2) The * payment summary:
(a) must cover each of the * withholding payments mentioned in subsection (1); and
(b) may be in electronic form; and
(c) must be given:
(i) not later than 14 days after the end of 6 months after the end of the income year of the * managed investment trust in relation to which the relevant * fund payments were made; or
(ii) within a longer period allowed by the Commissioner.
22 Paragraph 16‑160(1)(a) in Schedule 1
Omit "or 12‑317", substitute ", 12‑317, 12‑385 or 12‑390".
23 Subsection 16‑170(1) in Schedule 1
After " payment summary ", insert "(except one relating to Subdivision 12‑H)".
24 After subsection 16‑170(1) in Schedule 1
Insert:
(1AA) A payment summary relating to Subdivision 12‑H is a statement that:
(a) names the payer and the recipient; and
(b) if the recipient has given the recipient's * tax file number or * ABN to the payer--states the tax file number or ABN; and
(c) states the total of the * withholding payments (if any) that it covers, and the total of the * amounts withheld by the payer from those withholding payments; and
(d) specifies the income year of the relevant * managed investment trust to which it relates.
25 Subsection 16‑175(1) in Schedule 1
After "16‑155,", insert "16‑157,".
26 Subsection 16‑175(1) in Schedule 1
After "16‑170(1),", insert "(1AA),".
27 At the end of section 18‑15 in Schedule 1
Add:
(3) An entity is not entitled to a credit under this section in relation to a * withholding payment if the entity is entitled to a credit under section 18‑50 in relation to that withholding payment.
28 At the end of section 18‑25 in Schedule 1
Add:
(9) An entity is not entitled to a credit under this section in relation to a * withholding payment if the entity is entitled to a credit under section 18‑50 in relation to that withholding payment.
29 Paragraph 20‑35(3)(a) in Schedule 1
After " * payment summary", insert "(except one relating to Subdivision 12‑H)".
30 Paragraph 20‑35(3)(b) in Schedule 1
Before "a payment summary", insert "such".
31 At the end of section 20‑35 in Schedule 1
Add:
(4) A person must not, with the intention of obtaining a credit, a payment or any other benefit, present:
(a) a * payment summary relating to Subdivision 12‑H, or a copy of such a payment summary; or
(b) a document purporting to be such a payment summary or a copy of such a payment summary;
which is not a payment summary, or a copy of a payment summary, duly given to the person.
Penalty: 60 penalty units, or imprisonment for 12 months, or both.
Note: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit.
Part 3 -- Application
32 Application
The amendments made by this Schedule apply to the first income year starting on or after the first 1 July after the day on which this Act receives the Royal Assent and later income years.
[ Minister's second reading speech made in--
House of Representatives on 10 May 2007
Senate on 12 June 2007 ]
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(74/07) |
