Tax Laws Amendment (Election Commitments No. 1) Act 2008 (32 of 2008)

Schedule 1   Distributions of managed investment trust income to foreign residents

Part 2   Amendment of the Income Tax Assessment Act 1997

2   After Division 830

Insert:

Division 840 - Withholding taxes

Table of Subdivisions

Guide to Division 840

840-M Managed investment trust withholding tax

Guide to Division 840

840-1 What this Division is about

This Division provides the rules to determine if you are liable to pay income tax in respect of certain Australian sourced income paid to you, or which you are entitled to receive.

The rules are relevant for foreign residents and certain other entities.

The income tax payable is a withholding tax. The associated withholding obligations are in the Taxation Administration Act 1953.

Amounts on which there is a liability to pay withholding tax are non-assessable non-exempt income.

Subdivision 840-M - Managed investment trust withholding tax

Guide to Subdivision 840-M

840-800 What this Subdivision is about

If you are a foreign resident you may be liable to pay income tax on certain amounts of Australian sourced net income (other than dividends, interest and royalties) of a managed investment trust that are either paid to you or to which you become entitled.

A beneficiary of a trust in the capacity of a trustee of another trust will not be liable to income tax on these amounts.

Amounts on which there is a liability to pay withholding tax are non-assessable non-exempt income.

Table of sections

Operative provisions

840-805 Liability for managed investment trust withholding tax

840-810 When managed investment trust withholding tax is payable

840-815 Certain income is non-assessable non-exempt income

840-820 Agency rules

Operative provisions

840-805 Liability for managed investment trust withholding tax

Liability

(1) You are liable to pay income tax at the rate declared by the Parliament on the amount identified in subsection (2), (3) or (4) as the fund payment part if that subsection applies to you.

Note 1: The tax, which is called managed investment trust withholding tax, is imposed by the Income Tax (Managed Investment Trust Withholding Tax) Act 2008 and the rate of the tax is set out in that Act.

Note 2: See Subdivision 12-H in Schedule 1 to the Taxation Administration Act 1953 for provisions dealing with withholding from fund payments.

Note 3: This subsection does not apply to residents of information exchange countries for the first income year starting on or after the first 1 July after the day on which the Tax Laws Amendment (Election Commitments No. 1) Act 2008 receives the Royal Assent. Subdivision 840-M of the Income Tax (Transitional Provisions) Act 1997 applies instead.

Payments from managed investment trusts

(2) This subsection applies to you if:

(a) you are paid an amount from a trust that is a *managed investment trust in relation to an income year, or an amount is applied or dealt with as you direct by such a trust; and

(b) all or part of that amount (the fund payment part ) is represented by a payment that is a *fund payment in relation to that year; and

(c) you are, in respect of the fund payment part, a beneficiary (but not a beneficiary in the capacity of a trustee of another trust); and

(d) you are a foreign resident when you are paid the amount or when the amount is applied or dealt with as you direct.

Payments from custodians

(3) This subsection applies to you if:

(a) you are paid an amount from a *custodian, or an amount is applied or dealt with as you direct by a custodian; and

(b) all or part of that amount (the fund payment part ) is reasonably attributable to a payment that is a *fund payment in relation to an income year by a trust that is a *managed investment trust in relation to that year; and

(c) you are, in respect of the fund payment part, a beneficiary (but not a beneficiary in the capacity of a trustee of another trust); and

(d) you are a foreign resident when you are paid the amount or when the amount is applied or dealt with as you direct; and

(e) either:

(i) the custodian is not a company; or

(ii) if it is a company, it would be acting in the capacity as your *agent apart from section 840-820.

Entitlements to amounts from other entities

(4) This subsection applies to you if:

(a) you are a beneficiary of a trust (that is not a *managed investment trust or a *custodian) and are presently entitled to a share of the income or capital of the trust; and

(b) all or part of that share (also the fund payment part ) is reasonably attributable to a payment that is a *fund payment in relation to an income year made by a trust that is a managed investment trust in relation to that year; and

(c) you are not, in respect of that share, a beneficiary in the capacity of a trustee of another trust; and

(d) you are a foreign resident at the time (the entitlement time ) when you became presently entitled.

Entitlement to capital of a trust

(5) For the purposes of this section, section 95A of the Income Tax Assessment Act 1936 applies in relation to capital of a trust in the same way as it applies to income of the trust.

Exception

(6) This section does not apply to you if:

(a) you are paid the fund payment part, or it is applied or dealt with as you direct; or

(b) you become presently entitled to it;

in the course of a *business you carry on at or through an *Australian permanent establishment.

840-810 When managed investment trust withholding tax is payable

(1) *Managed investment trust withholding tax is due and payable by you at the end of 21 days after:

(a) if subsection 840-805(2) or (3) applies to you - the end of the month in which the fund payment part is paid, applied or dealt with; or

(b) if subsection 840-805(4) applies to you - the end of the month in which the entitlement time occurs.

(2) If any of the *managed investment trust withholding tax that you are liable to pay remains unpaid after the time by which it is due to be paid, you are liable to pay the *general interest charge on the unpaid amount for each day in the period that:

(a) starts at the beginning of the day by which the withholding tax was due to be paid; and

(b) ends at the end of the last day on which, at the end of the day, any of the following remains unpaid:

(i) the withholding tax;

(ii) general interest charge on any of the withholding tax.

Note: The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953.

(3) The Commissioner may give you a notice specifying:

(a) the amount of any *managed investment trust withholding tax that the Commissioner has ascertained is payable by you; and

(b) the day on which that tax became due and payable.

(4) The ascertainment of an amount of *managed investment trust withholding tax is not an assessment for the purposes of this Act.

(5) The production of a notice given under subsection (3), or of a copy of it certified by or on behalf of the Commissioner, is conclusive evidence that the notice was given and of the particulars in it.

840-815 Certain income is non-assessable non-exempt income

An amount on which *managed investment trust withholding tax is payable is not assessable income and is not *exempt income of an entity.

840-820 Agency rules

(1) This section applies to:

(a) a payment (the first payment ) made to a *custodian in the capacity as *agent for another entity; and

(b) another payment made by the custodian to the extent that it is reasonably attributable to the first payment.

(2) This Subdivision has effect as if the *custodian were not an *agent in relation to the payments.