Withholding for MITs
The withholding obligations for a MIT or an AMIT depend on whether or not it is a withholding MIT. A trust is a withholding MIT, in relation to an income year, if:
- it is a MIT (subject to certain exceptions), or would be a MIT, in relation to the income year except for temporary circumstances outside of its control, and
- a substantial proportion of the investment management activities are carried out in Australia throughout the income year for assets that are
- situated in Australia at any time in the income year
- taxable Australian property at any time in the income year
- Australian stock exchange listed shares, units or interests.
If a MIT or an AMIT is not a withholding MIT, then:
- the trustee will be taxed in the place of the non-resident member on Australian sourced income and capital gains, and
- the member will generally be entitled to a credit against their tax liability for the tax paid by the trustee.
Dividend, interest and royalty withholding (DIR) may still apply, even if the MIT (or AMIT) is not a withholding MIT.
If a MIT is not a withholding MIT, it must include beneficiary and income details in the trust income tax return for any amounts to which a non-resident beneficiary is presently entitled.
An AMIT that is not a withholding MIT must include member and income details in the AMIT income tax return for any amounts attributed to non-residents.
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Any amount subject to withholding tax on fund payments or DIR is non-assessable non-exempt (NANE) income for the recipient. This ensures the withholding tax is a final tax for most foreign investors in MITs.
However, if you're an Australian resident and you receive an amount directly or indirectly which has been subject to MIT withholding, the amount will not be NANE, and the income will continue to be subject to tax at your marginal tax rate.
If you are an Australian resident, any payments you receive from a MIT or AMIT are not subject to the MIT withholding rules. However, a MIT or AMIT must notify you if any such payment is a fund payment (from a withholding MIT) or DIR payment (from an AMIT), and state the amount that would have been subject to withholding if you were a non-resident. The MIT or AMIT can notify you directly or make the payment details available for at least five years on a website you can access.
The notice requirement applies for actual and deemed payments. The notice must identify the part of the actual and deemed payment from which withholding would have been required, and the income year it relates to.
If the payment is made to an Australian resident through a custodian, the custodian is also required to provide notice in the same way as the MIT or AMIT.
If you have had tax withheld from the payments you receive from a MIT or an AMIT, the withholding MIT must provide you with a payment statement at the end of the income year that specifies:
- the name of the payer
- your name
- your tax file number (TFN) or Australian business number (ABN) (if provided)
- the total of the withholding payments it covers, and the total of the amounts withheld by the payer from those withholding payments
- the income year it relates to.
Reporting withholding to us
A withholding MIT must report to us the amounts withheld, by lodging an annual investment income report (AIIR).
AMIT reporting requirements
Penalty for failing to withhold
If the MIT (or AMIT) trustee fails to withhold from a payment to its non-resident members, the trustee will be liable for a penalty equal to the amount that was required to be withheld.