ATO ID 2012/8: Deemed quotation of tax file number in respect of distribution from investment body to non-resident investor: section 202EE of the ITAA 1936
Date of decision: 23 January 2012
Year of income: Year ending 30 June 2012 and future income years
Business line: Private Groups and High Wealth Individuals

Issue
When subsection 202EE(1) of the Income Tax Assessment Act 1936 (ITAA 1936) deems a non-resident beneficiary of a managed investment trust to have quoted their tax file number in relation to certain investments in the trust, does the deeming apply in respect of a distribution from the trustee of the trust at a particular time, or does it also apply to all future distributions from the trustee of the trust?

Decision
When subsection 202EE(1) of the ITAA 1936 deems a non-resident beneficiary of a managed investment trust to have quoted their tax file number in relation to certain investments in the trust, the deeming will only apply in respect of distributions from the trustee of the trust at a particular point in time. The subsection does not deem the tax file number to have been quoted in relation to future distributions from the trustee of the trust in connection with the investment.

Facts
A non-resident beneficiary receives a distribution from the trustee of a managed investment trust at a particular time in connection with an investment that it holds in the trust. The investment is one to which Part VA of the ITAA 1936 applies. The distribution from the trustee of the managed investment trust to the non-resident beneficiary represents income derived from the investment. The trustee of the managed investment trust expects to make future distributions from the trust to the non-resident beneficiary in connection with the investment in the trust. The trustee of the managed investment trust is required to withhold an amount under Subdivision 12-H of Schedule 1 to the Taxation Administration Act 1953 (TAA) from the distribution. The trustee expects to have the same withholding obligations in relation to its future distributions to the non-resident beneficiary.

Reasons for decision
Summary: Sections 12-140 and 12-145 of Schedule 1 to the TAA create a withholding obligation where an entity does not quote their tax file number in relation to certain investments. This withholding obligation operates as a compliance mechanism to ensure that payments of investments that are likely to be assessable in Australia are traceable via the entity's tax file number. Withholding will not be required where: Section 202EE of the ITAA 1936 deems a non-resident to have quoted its tax file number in certain situations. Subsection 202EE(1) of the ITAA 1936 relevantly provides: For the purposes of this Part, where: (a) a non-resident is an investor in relation to an investment to which this Part applies; and (b) at a particular time, the investment body pays an amount to the non-resident by way of income derived from the investment; The use of the terms 'at a particular time' and 'at that time' in subsection 202EE(1) of the ITAA 1936 indicates that subsection 202EE(1) is concerned with a distribution at a particular time rather than deeming the tax file number to have been quoted for the life of the investment. In comparison, subsection 202DB(1) of the ITAA 1936 provides for the quotation of a person's tax file number to an investment body for an investment. It uses the term 'in connection with the investment' without a reference to timing. This suggests that the tax file number applies for the life of the investment. If subsection 202EE(1) of the ITAA 1936 operates so as to treat a tax file number to be quoted for the life of the investment, it would just refer simply to the investment, as is the case in subsection 202DB(1) of the ITAA 1936. It would not contain references to the terms like 'at a particular time, the investment body pays an amount to the non-resident' and 'in connection with the investment at that time'. Therefore, subsection 202EE(1) of the ITAA 1936 treats a non-resident beneficiary of a managed investment trust to have quoted their tax file number in relation to certain investments in the trust only at the particular time of a distribution from the trustee of the trust. The subsection does not apply to future distributions from the trustee of the trust in connection with the investment. The criteria in subsection 202EE(1) of the ITAA 1936 therefore need to be considered at the time of each distribution to the non-resident to determine whether the non-resident is deemed to have quoted a tax file number.

Legislative references: Income Tax Assessment Act 1936 subsection 202DB(1) subsection 202EE(1)
Subject references: Non-resident beneficiaries Tax file number