Private ruling: Managed investment trust withholding
Date of advice: 12 February 2019
Published: May 2019
Ruling period: 1 January 2018 to 31 December 2018
Date scheme commenced: During the year ended 31 December 2018

Ruling: Q1: Is a trustee of a Trust (the Trustee) required to withhold from a fund payment, at the rate of 15% under section 12-385 of Schedule 1 to the Taxation Administration Act 1953 (TAA), when making the payment on or after 1 January 2019 to a beneficiary of the Trust (investor) with an address or place for payment in Switzerland at the time of payment? | A1: Yes.

Relevant facts and circumstances: In relation to the income year ended 31 December 2018 (the income year) the Trust is: ● a managed investment trust under section 275-10 of the Income Tax Assessment Act 1997 (ITAA 1997); ● a withholding MIT under section 12-383 of Schedule 1 to the TAA; ● an attribution managed investment trust under section 276-10 of the ITAA 1997; and ● not a clean building managed investment trust under section 12-425 of Schedule 1 to the TAA. The Trustee makes biannual distributions to its investors in relation to the income year. The Trustee proposes to make a fund payment, pursuant to section 12A -110 of the TAA, to investors in February 2019 in respect of the six months ended 31 December 2018. Some of the Trust’s investors will have an address or place for payment in Switzerland at the time the fund payment is made.


Reasons for decision: Summary: All legislative references in this Reasons for decision are to Schedule 1 to the TAA unless otherwise indicated. In relation to the income year the Trust is: ● a managed investment trust under section 275-10 of the ITAA 1997; ● a withholding MIT under section 12-383; ● an attribution managed investment trust under section 276-10 of the ITAA 1997; and ● not a clean building managed investment trust under section 12-425. As the Trust is a withholding MIT the Trustee has withholding obligations under section 12-385 in relation to distributions of amounts that constitute fund payments for the purposes of section 12A-110, which are paid to investors with an address or place for payment outside Australia (section 12-410). Subsection 12-385(3) specifies the rate at which a withholding MIT must withhold on fund payments it makes to investors with an address or place for payment outside Australia. As the Trust is a withholding MIT, which is not a clean building managed investment trust, if the investor in receipt of the fund payment has an address or place for payment in an information exchange country (‘EOI country’), the rate of withholding on the fund payment will be 15%. If the investor in receipt of the fund payment does not have an address or place for payment in an EOI country, the rate of withholding on the fund payment will be 30%. EOI countries, for the purposes of section 12-385, are listed at section 34 of the Taxation Administration Regulations 2017 (Regulations 2017). A number of countries including Switzerland were added to the list of EOI countries in section 34 by Taxation Administration Amendment (Updating the List of Exchange of Information Countries) Regulations 2018 (Amending EOI Regulation), with effect from 1 January 2019. The explanatory statement to the Amending EOI Regulation states: The regulations apply in relation to a fund payment (within the meaning given by sections 12-405 and 12A-110 of Schedule 1 to the Act) made to a resident of a country that has been added to the Taxation Administration Regulations 2017 on or after 1 January 2019. Having regard to the words in the provision, the fact that the recipient’s address or place for service can only be tested at a point in time, and the explanatory statement for the recent update to the EOI list it is considered, for the purposes of subsection 12-385(3), that the address or place for payment of an investor and whether it is an EOI country are tested at the time the fund payment is made. Therefore, the Trustee will be required to withhold from a fund payment, at a rate of 15% under section 12-385, when making the payment on or after 1 January 2019 to an investor with an address or place for payment in Switzerland at the time of payment.

Relevant legislative provision: Taxation Administration Act 1953 Section 12-385 of Schedule 1