Private ruling: Interest withholding obligation
Published: November 2011
Ruling period: 5 years from date of issue
Date scheme commenced: Various dates set out in the Product Disclosure Statements

Ruling: 1. Will the Issuer of an instrument be required to withhold tax from the amounts it pays to an investor under a Deferred Purchase Agreement pursuant to section 12-245 of the Taxation Administration Act 1953 ? | No. | 2. Will section 26-25 apply to disallow the Issuer from deducting the amounts under the Income Tax Assessment Act 1997 (ITAA 97)? | No

Relevant facts and circumstances: The following description of the scheme is based on information provided The following documents and facts form part of the scheme under consideration: · private ruling application. · the Product disclosure statements. · the investors are non residents of Australia · they intend to invest in Australia through a Deferred Purchase Agreement (DPA). · they may derive income. · the amount of each payment will be computed per annum but only for each day where the Performance condition is satisfied. · for each day where this condition is satisfied the investor will be entitled to a payment. · upon maturity, the final value of the DPA will be the issue price, unless the At-Risk condition is satisfied.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 128A (1AB), | Income Tax Assessment Act 1936 subsection 128A (1AC), | Income Tax Assessment Act 1936 subsection 128A (1AD), | Taxation Administration Act 1953 section 12-245 and | Income Tax Assessment Act 1997 section 26-25.

Reasons for decision: Summary: The payments do not constitute interest for the purposes of the withholding tax provisions in Division 11A of the ITAA 1936. | Detailed Reasoning - Detailed reasoning: The investor will be regarded as contracting to purchase the assets at maturity and the facts indicate that this is a capital investment with no debt like characteristics. As the investment amount is not a loan, the payments paid by the Issuer cannot be deemed or treated as interest. It is therefore not subject to section 12-245 of the TAA 1953.

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