ATO Interpretative Decision

ATO ID 2002/615 (Withdrawn)

Income Tax

• This ATO ID is withdrawn because it contains a view in respect of a provision of the Income Tax Assessment Act 1997 that does not apply after the 2012-2013 income year. Despite its withdrawal, this ATO ID continues to be a precedential ATO view in respect of decisions for income years up to, and including, the 2012-2013 income year.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the trustee of a non resident charitable trust established for public charitable purposes by will before 1 July 1997, exempt from liability to withholding tax under paragraph 128B(3)(a) of the Income Tax Assessment Act 1936 (ITAA 1936), on its interest and/or dividend income derived from Australian sources?

Decision

The trustee of the charitable trust is exempt from liability to withholding tax under paragraph 128B(3)(a) of the ITAA 1936, on its interest and/or dividend income derived from Australian sources.

Facts

•

The applicant has provided a copy of the will and trust deed;

•

The trust was created by will before 1 July 1997;

•

The trust is not resident in Australia and is exempt from income tax in the country in which it is resident; and

•

The trust has been endorsed as an Income Tax Exempt Charity (ITEC) in Australia.

Reasons for Decision

In terms of paragraph 128B(3)(a) of the ITAA 1936, withholding tax does not apply to income derived by a non-resident

(i)

that is exempt from income tax because of section 50-5 (other than because of item 1.5A, 1.5B or 1.6 in the table in that section) of the ITAA 1997; and

(ii)

that is exempt from income tax in the country in which the non-resident resides.

Section 50-1 and item 1.5 of the table in section 50-5 of the ITAA 1997, exempts from income tax the income of a fund established for public charitable purposes by will before 1 July 1997. The exemption is subject to the special conditions contained in sections 50-52 and 50-57 of the ITAA 1997 being satisfied.

The effect of the above provisions is that a non resident charitable trust established for public charitable purposes by will before 1 July 1997, is exempt from withholding tax on Australian source dividend and/or interest income if,

•

the trust has been endorsed as an Income Tax Exempt Charity (ITEC),

•

the income is applied for the purpose for which the trust was established and

•

the trust is exempt from income tax in its country of residence.

Year of income:  Year ended 30 June 2001 Year ending 30 June 2002 Year ending 30 June 2003 Year ending 30 June 2004 Year ending 30 June 2005

Legislative References:
Income Tax Assessment Act 1997
   section 50-1
   section 50-5
   section 50-52
   section 50-57
   Ch2-Pt2-15-Div50-SDiv50-B

Keywords
Withholding tax exemptions
Non resident trusts
Charitable trusts

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  31 May 2002

ISSN: 1445-2782