Non-resident withholding is where payers are required to withhold an amount from interest, unfranked dividend and royalty payments paid to non-residents. Non-residents may be:
- individuals
- partnerships
- companies
- trusts
- superannuation funds.
Taxpayers who are subject to non-resident withholding should advise you of their non-resident status and provide you with their overseas address.
You must withhold an amount from a payment of interest or unfranked dividend you make to a non-resident and one of the following applies:
- according to your records, their address is outside Australia
- they have authorised the payment to be made to an address outside Australia
- they are a non-resident and you received the payment on behalf of the investor.
Where you make a payment to a non-resident, the payment must be reported in the Annual investment income report, even if the payment is not subject to non-resident withholding.
Australian residents who temporarily live overseas, and who provide you with an overseas address for income payments and statements, are not subject to non-resident withholding tax.
Where a resident advises you of their continued Australian residency, non-resident withholding is not to be withheld. However, the tax file number (TFN) and Australian business number (ABN) provisions will apply.
You are required to record payments of interest and dividends as well as any withheld amounts in the Annual investment income report by 31 October after the end of the financial year.
When paying interest or dividends to non-residents, you are responsible for sending the amounts withheld to us.
If you pay royalties, you are required to submit an additional annual report by 31 October after the end of the income year. This is known as the PAYG withholding from interest, dividend and royalty payments paid to non-residents - annual report.
The amount to be withheld from a payment is:
- 10% for interest
- 30% for royalties
- 30% for dividends, unless an international agreement applies.
However, the withholding amount of a dividend will depend on a number of circumstances and whether it has been franked. For example, a dividend from a public company that has been fully franked, has already had tax taken out before being paid to a shareholder. No further amount needs to be withheld.
If a dividend is partially or completely unfranked, an amount must be withheld from the unfranked amount.
A non-resident is taken to have quoted their TFN if the investment body is required to withhold under subdivision 12-F of Schedule 1 to the Taxation Administration Act 1953 (TAA) (non-resident withholding).
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For more information about which countries Australia has tax treaties with and what the required withholding tax rates are, visit www.treasury.gov.au and search for 'Australian tax treaties table'.
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Should withheld amounts include cents?
Cents should not be included in withheld amounts; the whole dollar amount is the amount to be withheld and reported in the Annual investment income report.
If cents have been withheld incorrectly, then they need to be included in the Annual investment income report.
What if an investor changes residency status during the year?
If an investor is a non-resident for part of the year and becomes a resident for another part of the year, you need to report the status that they hold on 30 June of the financial year it is being reported.
Which withholding provisions apply to a joint account between a resident and a non-resident?
If the resident does not quote a TFN/ABN or claim an exemption, TFN/ABN withholding provisions apply to the total amount of interest or dividends payable to a joint account with a non-resident.
If the resident satisfies their TFN/ABN obligations, non-resident withholding must be withheld from the total amount of interest or dividends paid.
Are investment schemes required to withhold non-resident withholding tax where the distributions are tax deferred (Capital)?
Non-resident withholding is not required for a tax deferred component of a distribution.
For more information, refer to:
If you would like further information on PAYG withholding:
To obtain more information about reporting non-resident information in the Annual investment income report, you can:
If you do not speak English well and need help from us, phone the Translating and Interpreting Service on 13 14 50.
If you are deaf, or have a hearing or speech impairment, phone us through the National Relay Service (NRS) on the numbers listed below:
- TTY users, phone 13 36 77 and ask for the ATO number you need
- Speak and Listen (speech-to-speech relay) users, phone 1300 555 727 and ask for the ATO number you need
- internet relay users, connect to the NRS on www.relayservice.com.au and ask for the ATO number you need.
If you would like further information about the NRS, phone 1800 555 660 or email helpdesk@relayservice.com.au
Last Modified: Monday, 20 May 2013