INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 11A - Dividends, interest and royalties paid to non-residents and to certain other persons  

Subdivision A - General  

SECTION 128N   SPECIAL TAX PAYABLE IN RESPECT OF EXEMPT INTEREST IN CERTAIN CIRCUMSTANCES  

128N(1)   [Definitions]  

In this section:

period of disqualification
, in relation to a loan, means:

(a) a period, being the whole or a part of a financial year, during which, in respect of an amount being the whole or a part of the loan moneys, there has not subsisted a qualifying use of that amount; or

(b) a period, being the whole or a part of a financial year, during which, in respect of an amount being the whole or a part of the loan moneys, although there has subsisted a qualifying use of that amount, being a qualifying use arising from the making of a loan for use for the purposes of an enterprise in which there is substantial Australian participation, the amount exceeds the amount that, in the opinion of the Commissioner, can reasonably be regarded, having regard to the extent of that participation during that period, as an appropriate amount of contribution (in addition to any other contribution) by the Australian entity or Australian entities concerned to the funds required for the purposes of that enterprise; and

the relevant part
, in relation to a loan, means:

(a) in respect of a period of disqualification referred to in paragraph (a) of the definition of period of disqualification in this subsection - the amount referred to in that paragraph; or

(b) in respect of a period of disqualification referred to in paragraph (b) of that definition - so much of the amount first referred to in that paragraph as exceeds the amount last referred to in that paragraph,

less such amount, if any, as the Commissioner determines to be an amount that should reasonably be deducted, having regard to the extent to which interest in respect of the loan would not, apart from section 128G , have been subject to withholding tax or tax payable in accordance with section 126 .

128N(2)   [Liability on person raising loan]  

Notwithstanding anything contained in this Act, where:

(a) a certificate has been issued under section 128H in respect of a loan;

(b) any interest in respect of the loan has become payable in respect of a period that is, or includes, a period of disqualification; and

(c) that interest, or any of it, was interest upon which, by reason of the certificate, tax in accordance with this Division or section 126 was not payable;

the person who raised the loan is liable, or, if there is more than one such person, those persons are jointly and severally liable, to pay the tax imposed by the Income Tax (Withholding Tax Recoupment) Act 1971 in respect of so much of that interest as is interest in respect of the relevant part of the loan and is attributable to the period of disqualification.

128N(3)   [Different rates of interest]  

For the purposes of subsection (2), where different rates of interest are payable in respect of different portions of the loan, the relevant part of the loan shall be deemed to be divided amongst those portions in the proportions that they bear to one another.

128N(4)   [Special circumstances]  

For the purposes of the definition of period of disqualification in subsection (1), the Commissioner may, if he thinks fit, disregard the fact that a qualifying use of an amount did not subsist during a period where that circumstance is attributable to -

(a) a temporary delay that was reasonably involved in the making of arrangements for a qualifying use of that amount; or

(b) a temporary failure of an entity to satisfy the conditions upon which an entity is an Australian entity or a temporary failure of an enterprise to satisfy the conditions upon which an enterprise is an enterprise in which there is substantial Australian participation.

128N(5)   [Address for notice]  

The notice of assessment of tax payable in accordance with this section that is required by section 174 to be served shall be addressed to the person or persons liable to pay the tax at an address ascertained in accordance with the regulations.

128N(6)   [Remission by Commissioner]  

The Commissioner may, in any case, for reasons that he thinks sufficient, and either before or after making an assessment, remit, in whole or in part, so much of any tax payable in accordance with this section as is ascertained in accordance with paragraph 6(b) of the Income Tax (Withholding Tax Recoupment) Act 1971 .