Private ruling: Withholding tax - obligation to withhold
Published: July 2011

Ruling: Q1: Will an entity (the Payer) have an obligation to withhold and amount in respect of dividend income paid to the trustee of a bare trust (Entity A) under section 12-210 of Schedule 1 to the Taxation Administration Act 1953 (TAA)? | A1: No | Q2: Will the Payer have an obligation to withhold an amount in respect of interest income paid to Entity A under section 12-245 of Schedule 1 to the TAA? | A2: No | Q3: Will the Payer have an obligation to withhold an amount in respect of dividend income paid to a special purpose vehicle that is wholly owned, managed and controlled by a foreign government (Entity B) under section 12-210 of Schedule 1 to the TAA? | A3: No | Q4: Will the Payer have an obligation to withhold an amount in respect of interest income paid to Entity B under section 12-245 of Schedule 1 to the TAA? | A4: No

Relevant facts and circumstances: 1. The Payer is an Australian resident that is the head company of an Australian tax consolidated group. 2. Entity A is a non-resident of Australia. 3. Entity B is a non-resident of Australia. 4. Entity A and Entity B each hold debt and equity interests in the entity. 5. The Payer makes payments to each of Entity A and Entity B, consisting of both interest and dividend income. 6. Interest and dividend income paid by the Payer to Entity A is excluded from liability to withholding tax. 7. Interest and dividend income paid by the Payer to Entity B is excluded from liability to withholding tax.


Reasons for decision: Detailed Reasoning - Detailed reasoning: Section 12-210 of Schedule 1 to the TAA provides that a company that is an Australian resident must withhold an amount from a dividend it pays if: (a) according to the register of the company's members, the entity, or any of the entities, holding the *shares on which a dividend has been paid has an address outside Australia; or (b) that entity, or any of those entities, has authorised or directed the company to pay the dividend to an entity or entities at a place outside Australia. *denotes a term defined in section 995-1 of the Income Tax Assessment Act 1997. Section 12-245 of Schedule 1 to the TAA provides that an entity must withhold an amount from interest it pays to an entity or to entities jointly, if: (a) the recipient or any of the recipients 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 interest relates; or (b) the payer is authorised to pay the interest at a place outside Australia (whether to the recipient or any of the recipients or to anyone else). Section 12-300 of Schedule 1 to the TAA does not require an entity to withhold an amount from a dividend, interest or a royalty if no withholding tax is payable in respect of the dividend, interest or royalty. As both Entity A and Entity B do not have a liability to withholding tax on either dividends or interest paid from the Payer, the Payer is not required to withhold an amount from that dividend or interest income, in accordance with section 12-300 of Schedule 1 to the TAA.

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