• Implications of MIT withholding for foreign residents

    Withholding tax on MIT fund payments and dividend, interest or royalty (DIR) payments (including deemed payments) received from Australian MITs (and AMITs) is a final tax imposed on foreign residents. Payments (including deemed payments) received by a foreign resident that are subject to withholding tax are non-assessable non-exempt income for income tax purposes.

    If you're a foreign resident, your liability for withholding tax will generally be met by the amount being withheld by the trustee of an Australian MIT, custodian or other entity. If your only Australian income is a fund payment or DIR payment from a MIT, you are not required to lodge an Australian tax return, as long as tax has been correctly withheld from your payment.

    However, mismatches in withholding amounts can occur in certain situations, such as where the address of the recipient of the payment (such as a global custodian) is different from the address of the ultimate foreign investor. As a result, the withholding tax paid to us could be greater (or less) than the foreign investor's actual withholding tax liability.

    If the amount withheld is not the same as your tax liability, you:

    • can apply for a partial refund if the amount of MIT withholding tax paid to us is greater than your liability
    • must make a top-up payment of MIT withholding tax if the amount previously paid to us is less than your liability

    Note:

    Under the new tax system for MITs, you may receive 'deemed payments' if the MIT has elected into the attribution system (and is therefore an AMIT). Deemed payment amounts may be different to the amounts actually paid to you, and are also subject to withholding, even if you don't receive an actual or cash payment for them.

    You will need to check the information provided to you by the AMIT as to the amounts and types of payments that have been subject to withholding in order to work out whether the correct amount of tax has been withheld from your MIT income.

    Next steps:

    See also:

    Top-up payments

    Top-up payments of MIT withholding tax are required where your tax liability on a MIT payment is more than the amount withheld by the MIT. If you're the final recipient of the payment (the ultimate beneficiary), you are responsible for making a top-up payment over the amount of tax withheld from the payment.

    If your top-up payment is not paid by the due date, you must pay the general interest charge (GIC) on the unpaid amount for each day the amount remains unpaid. The Commissioner will issue you with a notice specifying the amount of GIC payable.

    See also:

    Information required for a top-up payment

    All correspondence you provide to us in relation to a top-up payment should include:

    • name and address of ultimate beneficiary
    • name of MIT(s)
    • date and amount of payments from MIT(s), and the amount withheld and paid to the ATO on each separate payment
    • year of income that each separate payment relates
    • name and address of the recipient at the time the payment was made (if different to the ultimate beneficiary)
    • country of tax residence of the ultimate beneficiary when each payment was received by the ultimate beneficiary
    • reason for top-up payment
    • MIT withholding tax liability and top-up for each separate payment, how each was calculated, and the total top-up payment amount
    • details of how and when the payment was made.
    Payment options for a top-up payment

    There are two payment options when making your top-up payment from overseas.

    Direct credit through SWIFT

    You can transfer your payment to us through SWIFT. Contact your overseas financial institution for advice on how to make your payment.

    Details you need:

    Bank

    Reserve Bank of Australia
    65 Martin Place
    Sydney NSW 2000
    Australia

    Bank identifier

    RSBKAU2S

    BSB

    093 003

    Account number

    316 385

    Account name

    ATO direct credit account

    Field 70 (or details of payment)

    HOR 72 DC 2

    Your payment must be sent in Australian dollars.

    Bank handling and exchange fees are generally automatically deducted from the exchanged value of the payment, at both the overseas bank and their companion bank in Australia, before being forwarded to us. You should make allowance for these fees when arranging your payment.

    Mail

    Mail a bank draft to us in Australian currency.

    You should also include a note that states:

    • your full name
    • your address and telephone number
    • HOR 72 dissection code 2.

    Mail your payment and note to:

    Australian Taxation Office
    Locked Bag 1936
    ALBURY NSW 1936

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      Last modified: 05 Apr 2017QC 47436