This fact sheet explains pay as you go (PAYG) withholding requirements where a non-profit organisation does not provide its Australian business number (ABN) or its tax file number (TFN) to its bank or other investment body.
It also explains how to claim an exemption from quoting a TFN and how to apply for a refund or credit of TFN amounts withheld.
Under the PAYG withholding requirements, an investment body (such as a bank, building society, unit trust or public company) must withhold an amount known as a ‘TFN withholding’ from the interest or dividends payable on an investment, unless the holder of the investment has:
- quoted its ABN (where the investment is held in the course or furtherance of an enterprise of the organisation) or its TFN to the investment body, or
- claimed an exemption from quoting a TFN to the investment body.
In the current income year, 2008-09, the rate of withholding is 46.5% of the payment.
Quoting your organisation's ABN or TFN to your investment body is not compulsory. However, amounts may be withheld if you don't.
You can quote your organisation’s ABN or TFN by visiting or writing to your investment body.
Your organisation may be able to claim an exemption from quoting either number if it is not required to lodge income tax returns.
A non-profit organisation is not required to lodge an income tax return if it is:
- a non-profit company that is resident in Australia and whose taxable income (not just interest or investment income) is $416 or less per annum, or
- a non-profit organisation such as a charity, club, society or association whose income is exempt under the tax law.
If you are unsure whether your non-profit organisation is required to lodge income tax returns, refer to Is your organisation exempt from income tax?
You must advise the investment body in writing that your organisation is claiming an exemption from quoting a TFN. The Tax Office does not have a specific form for this purpose. Your written advice to the investment body should include:
- your organisation's name and address
- details of the accounts and investments your organisation is claiming an exemption for, and
- the reason your organisation is not required to lodge an income tax return.
If your organisation is not required to lodge an income tax return because it is a non-profit company whose taxable income is $416 or less per annum, you can state the following reason:
The organisation is claiming an exemption from quoting a tax file number because it is a non-profit organisation which is not required to lodge an income tax return.
If your organisation is income tax exempt under the tax law, you can state the following reason:
The organisation is claiming an exemption from quoting a tax file number because it is an income tax exempt organisation which is not required to lodge a tax return.
The advice should be signed by an eligible representative of your organisation, such as the public officer, or your secretary or other office holder (if you are an unincorporated association).
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The income tax law does not require you to produce a statement or certificate from the Tax Office to prove your status to the investment body. Stating the reason for exemption in writing is sufficient.
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If your organisation has previously claimed an exemption from quoting a TFN on a bank account or investment and a change in its tax status required your organisation to lodge an income tax return in the year it earned income, you must advise the investment body of the change as soon as possible.
The investment body is then required to withhold amounts from interest or dividends payable on the investment unless you quote your organisation's ABN or TFN.
A penalty of $1,000 may be applied if you have not advised of the change within two months after the end of the year of income in which the change occurred.
Refunds may be claimed directly from the investment body or the Tax Office, depending on the circumstances. If your organisation is required to lodge an income tax return, amounts withheld can be claimed as a credit when your organisation lodges its return at the end of the financial year.
The investment body must refund your organisation amounts withheld in error when your organisation applies for a refund or the investment body becomes aware of the error. They must refund the amount by the 21 July that follows the financial year in which it withheld the amount.
If the investment body withholds…
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the….
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- TFN amounts even though you:
- quoted your ABN or TFN, or
- claimed an exemption
or
- more than the required amount
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investment body must refund these amounts by the 21 July following the financial year in which the amount was withheld if:
- your organisation applies for a refund, or
- the investment body became aware of the error.
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Your organisation can claim a 'direct refund' from the Tax Office where amounts were:
- withheld in error, your organisation did not apply to the investment body for a refund within the prescribed time and your organisation is not required to lodge an income tax return, or
- withheld correctly and your organisation is entitled to claim an exemption from quoting a TFN but had not done so.
To claim a 'direct refund' from the Tax Office, complete the form Australian resident investor - Refund application for tax file number amounts deducted (NAT 1846).
Last Modified: Thursday, 5 February 2009
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