Applying the new withholding rules from 1 July 2015
This information is relevant to trustees of qualifying MITs that choose to apply the new MIT rules (enacted on 5 May 2016) from 1 July 2015, where:
- the trustee is making interim payments (for example, quarterly or half yearly) to non-resident unit holders/members, or to custodians or other entities who may be making interim payments to non-residents
- at the time of making such interim payments the legislation had not been enacted
- the trustee relied on the latest publicly released exposure draft of the legislation or Bill to determine its withholding obligations at the time of those payments.
Any reference to a MIT trustee in the following guidance extends to a custodian or other entity that may be required to withhold amounts from fund payments or dividend, interest and royalty (DIR) payments to non-residents.
The withholding obligations determined at the time of payment may be different to your obligations under the enacted law.
Correcting in subsequent payments
Generally, a trustee of a MIT, when anticipating the proposed rules, must apply the proposed withholding provisions in a reasonable way and, over the course of the income year, withhold the correct amount of tax from fund payments and DIR payments.
If you discovered after the law was enacted that you over- or under-withheld from an earlier payment in 2015–16, you should adjust the amount you withhold from subsequent payments in 2015–16 to account for the discrepancy.
Where no further payments are made in the income year, foreign resident members will need to either:
- apply for a refund if the amount of withholding tax paid to us is greater than their liability
- make a top-up payment of withholding tax if the amount paid to us is less than their liability.
If you discover, prior to 1 July 2016, that you withheld more tax during 2015–16 than you should have, you must refund the extra amount you withheld to the member, even if you have already paid the amount to us.
If you have already paid the amount to us and you will not be liable to pay us any further withholding amounts for 2015–16, you will need to lodge a revised activity statement to recover the amount over-withheld. Revised activity statements are available in Online services for business if you are a registered user, or by phoning us on 13 28 66.
If you discover, after 30 June 2016, that you withheld more tax than you should have done, do not refund the amount to the member – if you do, we cannot refund the amount to you. Your member needs to make a refund application in writing to us.
A payer who fails to withhold an amount, or under-withholds, will be subject to an administrative penalty equal to the amount that they did not withhold. We also impose a general interest charge (GIC) on payments made to us after the due date, even if the amount was reported to us on time.
If you applied the law in a reasonable way and after 30 June 2016 you discover you have withheld less tax during the 2015–16 than you should have done, you are liable to pay a penalty equal to the amount that you did not withhold. However, if you pay the penalty by 30 September 2016, we will remit any GIC that would ordinarily be imposed.
If you do not pay the penalty by 30 September 2016, you remain liable to pay the GIC.
We will not automatically remit the GIC. You can apply for the GIC to be remitted if you can show the remission is warranted.
When you pay the penalty, you are entitled to recover an amount equal to the penalty from your members. Your members are entitled to a credit equal to the penalty or GIC you have paid, as appropriate.
Penalties may apply where you have made a false or misleading statement, or have been reckless, or intentionally disregarded the law.