Private ruling: Income tax exemption
Published: May 2012
Ruling period: Year ended 30 June 2012 | The scheme commence on: | 25 May 2012
Date scheme commenced: 25 May 2012

Ruling: Question and answer : | Is the trustee of your organisation excluded from liability to withholding tax on its interest and/or dividend income derived from Australia under paragraph 128B(3)(a) of the ITAA 1936? | No.

Relevant facts and circumstances: Your organisation has been established as a genuine charity, religious or apostolic organisation benefits for non-residents of Australia. It has been set up and maintained outside of Australia by non-residents of Australia. No contributions to the organisation are capable of being claimed as a rebate or deduction under any section of the ITAA 1936 or ITAA 1997. The organisation is exempt from income tax in the country of residence.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 128B | Income Tax Assessment Act 1936 Subsection 128B(3) | Income Tax Assessment Act 1936 Paragraph 128(3)(jb) | Income Tax Assessment Act 197 Section 50-5 | Income Tax Assessment Act 1997 Section 50-50 | Income Tax Assessment Regulations 1997 Regulation 50-50.01 | Income Tax Assessment Regulations 1997 Regulation 50-50.02 | Taxation Administration Act 1953 Section 359-5 of Sch 1 | Taxation Administration Act 1953 Sections 359-25(3) and (4) of Sch 1

Reasons for decision: Detailed Reasoning - Paragraph 128B(3)(a) of the ITAA 1936: Pursuant to paragraph 128B(3)(a) of the ITAA 1936, withholding tax does not apply to income derived by a non-resident (i) that is exempt from income tax because of section 50-5 (other than because of item 1.5A, 1.5B or 1.6 in the table in that section) of the ITAA 1997; and (ii) that is exempt from income tax in the country in which the non-resident resides. The two conditions must be met for the exemption to apply. The effect of sections 50-5 and 50-50 of the ITAA 1997 is that for a non-resident charitable institution or religious institution to be exempt from withholding tax on Australian sourced interest and/or dividend income it must: · have a physical presence in Australia and pursue its objectives principally in Australia, · be an institution to which tax deductible gifts can be made; · be prescribed a institution located outside Australia and exempt from income tax in the country in which it is resident; or · be a prescribed institution which has a physical presence in Australia but pursue its objectives principally outside Australia. Your organisation does not meet any of the conditions in section 50-50 of the ITAA 1997. It was set up and is maintained outside of Australia for the benefit of non-residents of Australia. Contributions made are not tax deductible in Australia. It is not a prescribed institution. (Note: prescribed institutions are contained in regulations 50-50.01 and 50-50.02 of the Income Tax Assessment Regulations 1997 .)

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