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Ruling

Subject: Foreign Earnings

Questions and answers:

Are you, as the agent for the 2011 overseas committee, required to withhold taxation in Australia on interest earned on surplus from the 2011 Overseas Conference?

Yes.

Are you, in your role as the agent for the 2011 overseas committee, required to withhold taxation in Australia on surplus held from the 2011 Overseas Conference?

No.

This ruling applies for the following periods:

Year ended 30 June 2010.

Year ended 30 June 2011.

The scheme commenced on:

1 July 2009.

Relevant facts:

You act as an events organizer in Australia and overseas.

You are an Australian private limited company with X directors.

You where engaged by an overseas committee (the overseas committee) who sought your services to assist with organising an Overseas Conference in 2011.

The conference committee was constituted by a majority of overseas personnel who were involved in the management and control of the conference. This committee will continue to run with identical members in 2013.

The event was held overseas around mid 2011 on behalf of Z and Y.

You were responsible for organising the entire event, including arranging the accommodation, collecting money, paying all accounts and holding the balance of monies remaining after the conclusion of the event.

All income, apart from interest income on the bank account held in Australia, was derived overseas.

The conference final surplus was AUD $X. Of this surplus $Y relates to bank interest. The surplus is currently held in a bank account in Australia but will be paid to an overseas bank account with a trust fund.

The bank was not aware of the foreign client (the overseas committee) and as such no tax has been withheld on interest earned.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Subsection 6-5.

Income Tax Assessment Act 1936 Section 128B.

Reasons for decision

In this instance the surplus derived by the overseas committee is foreign sourced income.

The interest is Australian sourced income being paid to a non-resident, the committee you held the funds for.

Withholding Tax on Interest

Non-resident withholding is where payers are required to withhold an amount from interest, unfranked dividend and royalty payments to non-residents. Taxpayers subject to non-resident withholding should advise you of their non-resident status and their overseas address.

You must withhold an amount from an interest payment you make to a non-resident if one of the following applies:

· according to your records, their address is outside Australia,

· they have authorised the payment to be made to an address outside Australia, and

· they are a non-resident and you received the payment on behalf of the investor.

As the financial institution was not aware that you where holding the amounts on behalf of a third party (the overseas committee) you have the withholding obligations to the overseas committee. You have acted as an agent, receiving payment on behalf of a non-resident.