(ii) consists of interest, or consists of dividends or non‑share dividends paid by a company that is a resident; and
(iii) is exempt from income tax in the country in which the non‑resident resides; or
Note: See subsection (3CA) for extra requirements relating to this paragraph.
(k) income that is not included in assessable income because of subsection 271‑105(1); or
(l) income derived by a trustee that, because of paragraph 102UK(2)(b) or 102UM(2)(b), is not included in the assessable income of a trustee beneficiary of the trust estate; or
(m) income that consists of a royalty that is paid to the non‑resident by a person (the lessee) as consideration for the lease, by the lessee from the non‑resident, of a vessel if:
(i) the lessee is an Australian resident company; and
(ii) the vessel is not an excluded vessel (within the meaning of the Shipping Reform (Tax Incentives) Act 2012); and
(iii) under the lease, the lessee has whole possession and control of the vessel (including the right to appoint the master and crew of the ship); and
(iv) during the period of the lease, the vessel is used, or is available for use, as mentioned in paragraph 8(1)(c) of the Shipping Reform (Tax Incentives) Act 2012; or
(n) income that is non‑assessable non‑exempt income because of Division 880 of the Income Tax Assessment Act 1997 or Division 880 of the Income Tax (Transitional Provisions) Act 1997.
(3A) Paragraph (3)(ga) does not apply to income consisting of a dividend, or a part of a dividend, that is derived by the trustee of a trust, or a partnership, to the extent (if any) to which any amount paid to, or applied for the benefit of, a taxpayer (being a beneficiary in the trust or a partner in the partnership) that:
(a) was attributable to the dividend; and
(b) was paid or applied:
(i) in respect of an interest in the trust or partnership that was acquired, or was acquired for a period that was extended, at or after the commencing time; or
(ii) under a financing arrangement (including an arrangement extending an earlier arrangement) entered into at or after the commencing time;
may reasonably be regarded as equivalent to the payment of interest on a loan.
(3B) In subsection (3A):
commencing time means 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997.
financing arrangement has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
(3C) In determining for the purposes of subsection (3A) the extent (if any) to which an amount may reasonably be regarded as equivalent to the payment of interest on a loan, regard is to be had to:
(a) the way in which the amount was calculated; and
(b) the conditions applying to the payment or application of the amount; and
(c) any other relevant matters.
(3CA) Paragraph (3)(jb) applies to income derived by the superannuation fund mentioned in subparagraph (3)(jb)(i) only if:
(a) the superannuation fund satisfies the portfolio interest test in subsection (3CC) in relation to the entity mentioned in subsection (3CB) (the test entity):
(i) at the time the income was derived; and
(ii) throughout any 12 month period that began no earlier than 24 months before that time and ended no later than that time; and
(b) the superannuation fund does not, at the time the income was derived, have influence of a kind described in subsection (3CD) in relation to the test entity; and
(c) the income is not non‑assessable non‑exempt income of the superannuation fund because of:
(i) Subdivision 880‑C of the Income Tax Assessment Act 1997; or
(ii) Division 880 of the Income Tax (Transitional Provisions) Act 1997.
(3CB) For the purposes of subsection (3CA), the test entity is:
(a) unless paragraph (b) applies—the entity that paid the interest, dividends or non‑share dividends as mentioned in subparagraph (3)(jb)(ii); or
(b) if subsection 128A(3) applies in relation to a resident trust estate (within the meaning of Division 6)—the trust estate.
(3CC) A superannuation fund satisfies the portfolio interest test in this subsection in relation to the test entity at a time if, at that time, the total participation interest (within the meaning of the Income Tax Assessment Act 1997) the superannuation fund holds in the test entity:
(a) is less than 10%; and
(b) would be less than 10% if, in working out the direct participation interest (within the meaning of that Act) that any entity holds in a company:
(i) an equity holder were treated as a shareholder; and
(ii) the total amount contributed to the company in respect of non‑share equity interests were included in the total paid‑up share capital of the company.
(3CD) A superannuation fund has influence of a kind described in this subsection in relation to the test entity at a time if any of the following requirements are satisfied at that time:
(a) the superannuation fund:
(i) is directly or indirectly able to determine; or
(ii) in acting in concert with others, is directly or indirectly able to determine;
the identity of at least one of the persons who, individually or together with others, make (or might reasonably be expected to make) the decisions that comprise the control and direction of the test entity’s operations;
(b) at least one of those persons is accustomed or obliged to act, or might reasonably be expected to act, in accordance with the directions, instructions or wishes of the superannuation fund (whether those directions, instructions or wishes are expressed directly or indirectly, or through the superannuation fund acting in concert with others).
(3CE) However, a superannuation fund does not have influence of a kind described in subsection (3CD) if, disregarding any breach of terms of a debt interest by any entity, the superannuation fund would not have influence of that kind.
(3D) This section does not apply to a demerger dividend to which section 45B does not apply.
(3E) This section does not apply to income that consists of a dividend that:
(a) is paid to a person who is a non‑resident carrying on business in Australia at or through a permanent establishment of the person in Australia; and
(b) is attributable to the permanent establishment; and
(c) is not paid to the person in the person’s capacity as trustee.
Note: This subsection not only ensures that this section does not apply to that income to make withholding tax payable on it, but also (as a result) ensures that none of that income is non‑assessable non‑exempt income under section 128D. Subsection 44(1) makes that income assessable income.
(3F) In subsection (3E):
permanent establishment of a person:
(a) has the same meaning as in a double tax agreement (as defined in Part X) that relates to a foreign country and affects the person; or
(b) has the meaning given by subsection 6(1), if there is no such agreement.
(4) A person who derives income to which this section applies that consists of a dividend is liable to pay income tax upon that income at the rate declared by the Parliament in respect of income to which this subsection applies.
(5) A person who derives income to which this section applies that consists of interest is, subject to subsections (6) and (7), liable to pay income tax upon that income at the rate declared by the Parliament in respect of income to which this subsection applies.
(5A) A person who derives income to which this section applies that consists of a royalty is liable to pay income tax upon that income at the rate declared by the Parliament in respect of income to which this subsection applies.
(6) Where:
(a) income to which this section applies consists of interest and is paid to the person by whom it is derived by a person to whom this section applies; and
(b) the interest is, in part only, an outgoing incurred by that person to whom this section applies in carrying on business in a country outside Australia at or through a permanent establishment of that person to whom this section applies in that country;
income tax is payable under subsection (5) upon so much only of the income as is attributable to so much of the interest as is not an outgoing so incurred.
(7) Where:
(a) income to which this section applies consists of interest and is paid to the person by whom it is derived by a person who, or by persons each of whom, is not a resident; and
(b) the interest is, in part only, an outgoing incurred by the person or persons by whom it is paid in carrying on business in Australia at or through a permanent establishment of that person or those persons in Australia;
income tax is payable under subsection (5) upon so much only of the income as is attributable to so much of the interest as is an outgoing so incurred.
(8) For the purposes of subparagraphs (2)(b)(i) and (2A)(b)(i) and paragraph (6)(b), where:
(a) interest is paid, or has, after 2 July 1973, been paid, to a person by another person, being a person to whom this section applies, carrying on business in a country outside Australia; and
(b) the interest or a part of the interest:
(i) is interest incurred by the other person in gaining or producing income that is derived by the other person otherwise than in carrying on business in a country outside Australia at or through a permanent establishment of the other person in that country or is interest incurred by the other person for the purpose of gaining or producing income to be so derived; or
(ii) is interest incurred by the other person in carrying on business for the purpose of gaining or producing income and is reasonably attributable to income that is derived, or may be derived, by the other person otherwise than in so carrying on business at or through a permanent establishment of the other person in a country outside Australia;
the interest or the part of the interest, as the case may be, is not an outgoing incurred by the other person in carrying on business in a country outside Australia at or through a permanent establishment of the other person in that country.
(9) For the purposes of subparagraphs (2)(b)(ii) and (2A)(b)(ii) and paragraph (7)(b), where:
(a) interest is paid, or has, after 2 July 1973, been paid, to a person by another person or other persons (in this subsection referred to as the borrower), being:
(i) another person who is or was carrying on business in Australia and is not or was not a resident; or
(ii) other persons who are or were carrying on business in Australia and each of whom is not or was not a resident; and
(b) the interest or a part of the interest:
(i) is interest incurred by the borrower in gaining or producing income that is derived by the borrower in carrying on business in Australia at or through a permanent establishment of the borrower in Australia or is interest incurred by the borrower for the purpose of gaining or producing income to be so derived; or
(ii) is interest incurred by the borrower in carrying on a business for the purpose of gaining or producing income and is reasonably attributable to income that is derived, or may be derived, by the borrower in so carrying on business at or through a permanent establishment of the borrower in Australia;
the interest or the part of the interest, as the case may be, is an outgoing incurred by the borrower in carrying on business in Australia at or through a permanent establishment of the borrower in Australia.
(9A) For the purposes of subparagraphs (2B)(b)(i) and (2C)(b)(i), where:
(a) a royalty is paid, to a person by another person, being a person to whom this section applies, carrying on business in a country outside Australia; and
(b) the royalty, or a part of the royalty:
(i) is a royalty incurred by the other person in gaining or producing income that is derived by the other person otherwise than in carrying on business in a country outside Australia at or through a permanent establishment of the other person in that country or is a royalty incurred by the other person for the purpose of gaining or producing income to be so derived; or
(ii) is a royalty incurred by the other person in carrying on business for the purpose of gaining or producing income and is reasonably attributable to income that is derived, or may be derived, by the other person otherwise than in so carrying on business at or through a permanent establishment of the other person in a country outside Australia;
the royalty or the part of the royalty, as the case may be, is not an outgoing incurred by the other person in carrying on business in a country outside Australia at or through a permanent establishment of the other person in that country.
(9B) For the purposes of subparagraphs (2B)(b)(ii) and (2C)(b)(ii), where:
(a) a royalty is paid to a person by another person or other persons (the licensee), being:
(i) another person who is or was carrying on business in Australia and is not or was not a resident; or
(ii) other persons who are or were carrying on business in Australia and each of whom is not or was not a resident; and
(b) the royalty or a part of the royalty:
(i) is a royalty incurred by the licensee in gaining or producing income that is derived by the licensee in carrying on business in Australia at or through a permanent establishment of the licensee in Australia or is a royalty incurred by the licensee for the purpose of gaining or producing income to be so derived; or
(ii) is a royalty incurred by the licensee in carrying on a business for the purpose of gaining or producing income and is reasonably attributable to income that is derived, or may be derived, by the licensee in so carrying on business at or through a permanent establishment of the licensee in Australia;
the royalty or the part of the royalty, as the case may be, is an outgoing incurred by the licensee in carrying on business in Australia at or through a permanent establishment of the licensee in Australia.
(9C) If:
(a) apart from this subsection, tax would be payable under subsection 126(1) on an amount of interest paid to a person; and
(b) section 128F would apply to the interest, assuming that paragraph (1)(e) of that section had not been enacted;
then:
(c) despite anything else in this section, the interest is taken, for the purposes of this Division, to be income derived by the person and to be income to which this section applies; and
Note: As a result of this paragraph, the interest will not be subject to tax under subsection 126(1): see paragraph 126(1)(b).
(d) in addition to the effect of any credit arising under section 18‑30 in Schedule 1 to the Taxation Administration Act 1953 in respect of the interest, the total tax payable by the person, other than under this section, is reduced by the amount of any tax payable under this section on the interest; and
(e) tax paid under this section on the interest is not an allowable deduction.
(10) Income tax payable by a person in accordance with this section is in addition to any other income tax payable by him or her upon income to which this section does not apply.
(11) Income tax payable by a person in accordance with this section upon income to which this section applies by virtue of subsection (2A) or (2C) is in addition to, and shall not be taken into account in arriving at the amount of, any other income tax payable by him or her in respect of that income.
128C Payment of withholding tax
(1) Withholding tax is due and payable by the person liable to pay the tax at the expiration of 21 days after the end of the month in which the income to which the tax relates was derived by the person.
(3) If any of the withholding tax which a person is liable to pay remains unpaid after the time by which it is due to be paid, the person is liable to pay the general interest charge on the unpaid amount for each day in the period that:
(a) started at the beginning of the day by which the withholding tax was due to be paid; and
(b) finishes 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.
(4AA) If:
(a) a person is liable to pay the general interest charge on an amount of withholding tax which is payable on an amount that, by virtue of the application of section 128AA, is taken to consist of interest paid in relation to the transfer of a qualifying security;
(b) the Commissioner is satisfied that:
(i) before the security was transferred, a notice expressed to be issued under subsection 265B(4) identifying the security was given by the person, in connection with the transfer, to the transferee;
(ii) one or more of the statements made in the notice is incorrect; and
(iii) the person did not know of the circumstance referred to in subparagraph (ii) at the time of transfer of the security; and
(c) the proper amount of the withholding tax liability of the person exceeds the amount that would have been the amount of the withholding tax liability if it were determined on the basis that the statements made in the notice were correct;
the Commissioner shall remit so much of the amount of the general interest charge as bears to that amount the same proportion as the amount of the excess referred to in paragraph (c) bears to the amount of withholding tax.
(6) The ascertainment of the amount of any withholding tax shall not be deemed to be an assessment within the meaning of any of the provisions of this Act.
(7) The Commissioner may serve on a person, by post or otherwise, a notice in which is specified:
(a) the amount of any withholding tax that the Commissioner has ascertained is payable by that person; and
(b) the date on which that tax became due and payable.