(1A) The Minister must not make a declaration under subsection (2), or a determination under subsection (2AA), after the day on which the Treasury Laws Amendment (2021 Measures No. 2) Act 2021 received the Royal Assent.
(2) The Minister may, by notifiable instrument, declare a person being:
(a) a body corporate that is an ADI (authorised deposit‑taking institution) for the purposes of the Banking Act 1959; or
(b) a public authority constituted by a law of a State, being a public authority that carries on the business of State banking; or
(ba) a company in which all of the equity interests are beneficially owned by an offshore banking unit (other than one to which paragraph (c) applies); or
(c) a person whom the Minister is satisfied is appropriately authorised to carry on business as a dealer in foreign exchange; or
(d) a life insurance company registered under section 21 of the Life Insurance Act 1995; or
(e) a company incorporated under the Corporations Act 2001 that provides funds management services on a commercial basis (other than solely to related persons):
(i) that is, under the Financial Sector (Collection of Data) Act 2001, a registered entity included in the category for money market corporations; or
(ii) all of the shares which are beneficially owned by a company covered by subparagraph (i); or
(iii) a financial services licensee (within the meaning of the Corporations Act 2001) whose licence covers dealing in securities (within the meaning of subsection 92(3) of that Act), providing financial advice in relation to such securities or operating a managed investment scheme (within the meaning of that Act); or
(f) a company that the Minister determines, in writing, to be an OBU under subsection (2AA);
to be an offshore banking unit for the purposes of this Division.
(2AA) The Minister may, on written application by a company, determine, by notifiable instrument, that the company is an OBU.
(2AB) The determination must:
(a) specify the day when the company commences to be an OBU; and
(b) contain any other information the Minister considers appropriate.
(2AC) A determination of the Minister under subsection (2AA) must be made in accordance with guidelines determined by the Minister under subsection (2AD).
(2ACA) A determination under subsection (2AA) that a company is an OBU and a declaration under subsection (2), for the purposes of paragraph (2)(f), that the company is an offshore banking unit for the purposes of this Division may be included in the same instrument.
(2AD) The Minister must, by legislative instrument, determine guidelines for the making of determinations under subsection (2AA). The guidelines may require the Minister to take into account:
(2A) If a person who is an offshore banking unit for the purposes of this Division:
(a) is convicted of an offence against section 8L, 8N, 8Q, 8T or 8U of the Taxation Administration Act 1953, or against Division 136 or 137 of the Criminal Code in relation to a taxation law (within the meaning of the Taxation Administration Act 1953); or
(b) incurs a tax liability, within the meaning of that Act, by way of a penalty equal to 90% of an amount;
the Minister may, by notifiable instrument, declare that the person is no longer an offshore banking unit for the purposes of this Division.
(2B) If the Minister makes such a declaration in respect of a company that is an offshore banking unit only because of paragraph (2)(ba), the offshore banking unit mentioned in that paragraph, and in any previous application of that paragraph that was necessary for it to apply to the company, is no longer an offshore banking unit from the time when the declaration comes into force.
(2C) If a person who is an offshore banking unit ceases to be a person of a kind mentioned in any of paragraphs (2)(a), (b), (ba) and (c), the Minister must, by notifiable instrument, declare that the person is no longer an offshore banking unit for the purposes of this Division.
(2D) Except as mentioned in subsection (2A), (2B) or (2C), a person does not cease to be an offshore banking unit for the purposes of this Division.
(3) A declaration under subsection (2), (2A) or (2C) shall not come into force before the day on which the declaration is registered on the Federal Register of Legislation under the Legislation Act 2003.
(4) Where:
(a) a person who is an offshore banking unit makes an offshore borrowing or offshore gold borrowing; and
(b) the lender would, but for section 128GB, be liable to pay withholding tax on income consisting of interest on the offshore borrowing or offshore gold borrowing;
then, for the purposes of this Division, the amount borrowed is tax exempt loan money or tax exempt gold of the person.
(5) Where:
(a) a person who is or has been an offshore banking unit makes a loan of tax exempt loan money or tax exempt gold where the loan is an OB activity or would be if the person were an OBU; and
(b) the loan is repaid;
the amount repaid is, for the purposes of this Division, deemed to be tax exempt loan money or tax exempt gold of the person.
(7) Where a person who is or has been an offshore banking unit transfers an amount of tax exempt loan money or tax exempt gold to another person, the following provisions have effect for the purposes of this Division:
(a) subject to subsections (10) and (11), the amount transferred ceases to be tax exempt loan money or tax exempt gold of the person; and
(b) the amount transferred does not become tax exempt loan money or tax exempt gold of the other person.
(8) Where a person who is or has been an offshore banking unit transfers to another person an amount of money or gold that, in the opinion of the Commissioner, includes tax exempt loan money or tax exempt gold, so much of the amount transferred as the Commissioner considers was tax exempt loan money or tax exempt gold is deemed, for the purposes of this Division, to have been tax exempt loan money or tax exempt gold of the person.
(9) Where a person who is or has been an offshore banking unit deals with an amount of tax exempt loan money or tax exempt gold of the person under the person’s internal accounting arrangements in such a way that the amount becomes available for possible transfer to other persons (other than by way of payment in carrying on an OB activity, or what would be an OB activity if the person were an OBU, or repayment of an offshore borrowing or an offshore gold borrowing), the following provisions have effect for the purposes of this Division:
(a) the person is, when the amount so becomes available, deemed to make a transfer of the amount to another person, other than by way of payment in carrying on an OB activity (or what would be an OB activity if the person were an OBU) or repayment of an offshore borrowing or an offshore gold borrowing;
(b) any actual transfer of the amount by the person to another person shall be disregarded.
(10) For the purposes of this Division, where a person who is or has been an offshore banking unit transfers tax exempt loan money to another person in exchange for an equivalent amount in a different currency:
(a) the amount received in exchange shall be taken to be the same money as was transferred; and
(b) the transfer shall be taken not to have occurred.
(11) For the purposes of this Division, where a person who is or has been an offshore banking unit transfers tax exempt loan money or tax exempt gold to another person by way of a deposit for the purposes of temporary safe‑keeping pending the making of an offshore loan or repayment of an offshore borrowing or an offshore gold borrowing:
(a) the amount held on deposit and upon being repaid shall be taken to be the same money as was transferred; and
(b) the transfer shall be taken not to have occurred.
(12) For the purposes of this section, an amount:
(a) deposited in an account with a bank or other financial institution; or
(b) paid by way of consideration for the issue of a security;
shall be taken to have been lent to, and borrowed by, the bank, financial institution or issuer of the security.
(13) If an offshore banking unit consists of:
(a) one or more permanent establishments in Australia at or through which the offshore banking unit carries on what are OB activities within the meaning of Division 9A; and
(b) one or more other permanent establishments either in Australia or outside Australia;
then this section and section 128NB apply as if:
(c) the offshore banking unit consisted only of the permanent establishments referred to in paragraph (a); and
(d) the permanent establishments referred to in paragraph (b) were separate persons.
128AF Payments through interposed entities
(1) This section applies if:
(a) a payment received by a non‑resident through one or more interposed companies, partnerships, trusts or other persons is attributable to an amount of dividends, interest or royalties paid by a resident; and
(b) one or more of the interposed companies, partnerships, trusts or other persons is exempt from tax.
(1A) However, this section does not apply if one or more of the interposed entities is an AMIT for the year of income in which the payment is received.
Note: See Division 12A in Schedule 1 to the Taxation Administration Act 1953 for provisions about withholding tax that apply specifically to AMITs.
(2) If this section applies, the amount of dividends, interest or royalties paid by a resident is taken, for the purposes of this Division, to have been paid by the resident directly to the non‑resident.
(3) For the purposes of this section, a person is exempt from tax if, at the time at which the payment was received by the non‑resident, all income of the person was exempt from tax.
128B Liability to withholding tax
(1A) In this section, a reference to a person to whom this section applies is a reference to the Commonwealth, a State, an authority of the Commonwealth or of a State or a person who is, or persons at least 1 of whom is, a resident.
Note: References in this section to amounts paid to a person may include amounts from an AMIT that, under section 12A‑205 in Schedule 1 to the Taxation Administration Act 1953, are treated as payments to the person (from the trustee of the AMIT or a custodian).
(1) Subject to subsections (3), (3A), (3D) and (3E), this section applies to income that:
(a) is derived, on or after 1 January 1968, by a non‑resident; and
(b) consists of a dividend paid by a company that is a resident.
Note: An amount declared to be conduit foreign income is an amount to which this section does not apply: see sections 802‑15 and 802‑17 of the Income Tax Assessment Act 1997.
(2) Subject to subsection (3), this section also applies to income that:
(a) is derived, on or after 1 January 1968, by a non‑resident; and
(b) consists of interest that:
(i) is paid to the non‑resident by a person to whom this section applies and is not an outgoing wholly incurred by that person in carrying on business in a country outside Australia at or through a permanent establishment of that person in that country; or
(ii) is paid to the non‑resident by a person who, or by persons each of whom, is not a resident and is, or is in part, an outgoing incurred by that person or those persons in carrying on business in Australia at or through a permanent establishment of that person or those persons in Australia.
Note: An amount of interest paid to a person by a temporary resident is an amount to which this section does not apply: see section 768‑980 of the Income Tax Assessment Act 1997.
(2A) Subject to subsection (3), where income:
(a) is, or has, after 2 July 1973, been, derived, or derived in part, by a person to whom this section applies in carrying on business in a country outside Australia at or through a permanent establishment of the person in that country; and
(b) consists of interest that:
(i) is or has been paid to the person by another person to whom this section applies and is not an outgoing wholly incurred by that other person in carrying on business in a country outside Australia at or through a permanent establishment of that other person in that country; or
(ii) is or has been paid to the first‑mentioned person by a person who is, or by persons each of whom is, not a resident and is, or is in part, an outgoing incurred by that last‑mentioned person or those last‑mentioned persons in carrying on business in Australia at or through a permanent establishment of that last‑mentioned person or those last‑mentioned persons in Australia;
this section also applies to that income or to the part of that income so derived, as the case may be.
Note: An amount of interest paid to a person by a temporary resident is an amount to which this section does not apply: see section 768‑980 of the Income Tax Assessment Act 1997.
(2B) Subject to subsection (3), this section also applies to income that:
(a) is derived by a non‑resident:
(i) during the 1993‑94 year of income of the non‑resident; or
(ii) during a later year of income of the non‑resident; and
(b) consists of a royalty that:
(i) is paid to the non‑resident by a person to whom this section applies and is not an outgoing wholly incurred by that person in carrying on business in a foreign country at or through a permanent establishment of that person in that country; or
(ii) is paid to the non‑resident by a person who, or by persons each of whom, is not a resident and is, or is in part, an outgoing incurred by that person or those persons in carrying on business in Australia at or through a permanent establishment of that person or those persons in Australia.
(2C) Subject to subsection (3), where income:
(a) is derived, or derived in part, by a person (the recipient) to whom this section applies in carrying on business in a country outside Australia at or through a permanent establishment of the person in that country; and
(b) consists of a royalty that:
(i) is paid to the recipient by another person (the payer) to whom this section applies and is not an outgoing wholly incurred by the payer in carrying on business in a country outside Australia at or through a permanent establishment of the payer in that country; or
(ii) is paid to the recipient by one or more persons (the non‑resident payers), each of whom is not a resident, and is, or is in part, an outgoing incurred by the non‑resident payers in carrying on business in Australia at or through a permanent establishment of the non‑resident payers in Australia;
this section also applies to that income or to the part of that income mentioned in paragraph (a).
(2D) Subsections (2B) and (2C) do not apply to income to the extent to which it is a return on an equity interest in a company.
(3) This section does not apply to:
(aaa) income that consists of a non‑share dividend that is unfrankable under section 215‑10 of the Income Tax Assessment Act 1997; or
(a) income derived by a non‑resident that is:
(i) exempt from income tax because of section 50‑5 (other than because of item 1.6 in the table in that section) or 50‑10, item 6.1 or 6.2 of the table in section 50‑30, section 50‑40 or item 9.1, 9.2, 9.3, 9.4 or 9.5 of the table in section 50‑45 of the Income Tax Assessment Act 1997; and
(ii) exempt from income tax in the country in which the non‑resident resides; or
(aa) income derived by a non‑resident that is an overseas charitable institution (within the meaning of section 121C) where the income is exempt under subsection 121ELA(1); or
(ba) income that is exempt from income tax because of section 124ZM (which exempts dividends paid by PDFs); or
(d) income in respect of which a trustee is liable to be assessed under section 99 or section 99A; or
(e) income that is derived by a trustee, being a trustee in relation to a trust created by a person who, at the time the income is derived, is a resident and in respect of which the Commissioner is empowered, under section 102, to assess the trustee to pay income tax; or
(ga) income that consists of:
(i) the franked part of a dividend; or
(ii) in relation to a dividend that is paid by a former exempting entity (within the meaning of the Income Tax Assessment Act 1997) on a share acquired under an employee share scheme (within the meaning of that Act)—the part of the dividend that is franked with an exempting credit; or
(iii) in relation to a dividend that is paid by a former exempting entity (within the meaning of the Income Tax Assessment Act 1997) to an eligible continuing substantial member (within the meaning of that Act)—the part of the dividend that is franked with an exempting credit;
other than a dividend in respect of which a determination is made under paragraph 204‑30(3)(c) of the Income Tax Assessment Act 1997 or a dividend or a part of a dividend in respect of which a determination is made under paragraph 177EA(5)(b) of this Act; or
(gb) income that consists of a dividend derived from assets included in the insurance funds of a life assurance company that carries on business in Australia at or through a permanent establishment of the life assurance company in Australia; or
(gc) income that consists of interest derived on a nostro account by a non‑resident that is a foreign bank; or
(h) income that consists of:
(ii) interest derived by a non‑resident in carrying on business in Australia at or through a permanent establishment of the non‑resident in Australia (except interest derived by a limited partner in a VCLP, ESVCLP or AFOF as such a partner);
(iv) interest to which section 128F, 128FA or 128GB applies; or
(j) income in respect of which a taxpayer is liable to be assessed under Division 9C; or
(jb) income that:
(i) is derived by a non‑resident that is a superannuation fund for foreign residents; and