Private ruling: Withholding from payments to a non-resident
Published: October 2013
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Is the entity obliged to withhold from a payment to a foreign resident via an agent for the foreign resident under PAYG legislation? | A1: No


Relevant legislative provisions: Taxation Administration Act 1953 Section 12-315 | Taxation Administration Act 1953 Section 12-317 | Taxation Administration Act 1953 Section 12-319 | Taxation Administration Regulations Division 6

Reasons for decision: Summary: Section 12-315 of Schedule 1 to the Taxation Administration Act 1953 (TAA) discusses payments to foreign residents. Subsection 12-315(1) states an entity (the payer ) that carries on an enterprise must withhold an amount from a payment it makes to another entity, or to other entities jointly, in the course or furtherance of the enterprise if: (a) the entity receiving the payment, or any of the entities receiving the payment, is an entity covered by subsection (2); and (b) the payment is of a kind set out in the regulations; and (c) the payment is not: (i) a dividend of a company; or (ii) interest (within the meaning of Division 11A of Part III of the Income Tax Assessment Act 1936 ); or (iii) a royalty; or (iv) a departing Australia superannuation payment; or (v) a payment worked out wholly or partly by reference to the value or quantity of natural resources produced or recovered in Australia; or (vi) a mining payment; or (vii) an amount represented by or reasonably attributable to a fund payment; and (d) the entity receiving the payment is not covered by an exemption in force under subsection 12-319(1), or at least one of the entities receiving the payment is not covered by an exemption in force under that subsection. Subsection 12-315(2) states an entity is covered by this subsection if any of the following conditions is satisfied: (a) the entity is a foreign resident; (b) the payer believes, or has reasonable grounds to believe, that the entity is a foreign resident; (c) the payer has no reasonable grounds to believe that the entity is an Australian resident, and either: (i) the entity 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 entity or to anyone else); (d) the entity has a connection outside Australia of a kind set out in the regulations. Section 319 discusses exemptions from withholding obligations under Subdivision 12-FB. Subsection 319(1) states the Commissioner may grant an entity an exemption in writing for the purposes of paragraphs 12-315(1)(d) and 12-317(1)(d) if the Commissioner is satisfied that: (a) the entity has an established history of compliance with its obligations under taxation laws; and (b) the entity is likely to continue to comply with those obligations in the future. In this case the entity is the payer and it carries on an enterprise. The payment will be made to the non-resident's agent. The agent is an Australian resident company. The recipient of the payment, the agent, is not covered by subsection 12-315(2) therefore there is no obligation on the entity to withhold from a payment made to the agent.

Relevant facts: The entity is engaging a non-resident to perform. | The non-resident has engaged an authorised agent. | The agent is an Australian-based private company.