(8) The production of a notice served under subsection (7), or of a document under the hand of the Commissioner, a Second Commissioner or a Deputy Commissioner purporting to be a copy of such a notice, is prima facie evidence that the amount of withholding tax specified in the notice became due and payable by the person on whom the notice was served on the date so specified.
128D Certain income not assessable
Income other than income to which section 128B applies by virtue of subsection (2A), (2C) or (9C) of that section upon which withholding tax is payable, or upon which withholding tax would, but for paragraph 128B(3)(ga), (jb) or (m), section 128F, section 128FA or section 128GB, be payable, is not assessable income and is not exempt income of a person.
Note: An amount of interest paid to a person by a temporary resident is non‑assessable non‑exempt income: see section 768‑980 of the Income Tax Assessment Act 1997.
128F Division does not apply to interest on certain publicly offered company debentures or debt interests
Interest to which this section applies
(1) This section applies to interest paid by a company in respect of a debenture or debt interest in the company if:
(a) the company was a resident of Australia when it issued the debenture or debt interest; and
(b) the company is a resident of Australia when the interest is paid; and
(c) for a debt interest other than a debenture—the debt interest:
(i) is a non‑equity share; or
(ii) consists of 2 or more related schemes (within the meaning of the Income Tax Assessment Act 1997) where one or more of them is a non‑equity share; or
(iii) is a syndicated loan; or
(iv) is prescribed by the regulations for the purposes of this section; and
(d) either:
(i) the issue of the debenture or debt interest satisfies the public offer test set out in subsection (3) or (4); or
(ii) for a syndicated loan—the invitation to become a lender under the relevant syndicated loan facility satisfies the public offer test set out in subsection (3A).
(1A) This section also applies to interest paid by a company in respect of a debenture or debt interest in the company if:
(a) the company was a non‑resident when it issued the debenture or debt interest; and
(b) the company is a non‑resident when the interest is paid; and
(c) the debenture or debt interest was issued, and the interest is paid, by the company in carrying on business at or through a permanent establishment in Australia; and
(d) for a debt interest other than a debenture—the debt interest:
(i) is a non‑equity share; or
(ii) consists of 2 or more related schemes (within the meaning of the Income Tax Assessment Act 1997) where one or more of them is a non‑equity share; or
(iii) is a syndicated loan; or
(iv) is prescribed by the regulations for the purposes of this section; and
(e) either:
(i) the issue of the debenture or debt interest satisfies the public offer test set out in subsection (3) or (4); or
(ii) for a syndicated loan—the invitation to become a lender under the relevant syndicated loan facility satisfies the public offer test set out in subsection (3A).
(1B) If:
(a) some or all of the transfer price (within the meaning of section 128AA) of a debenture or debt interest is taken under that section to be income that consists of interest; and
(b) for a debt interest other than a debenture—the debt interest:
(i) is a non‑equity share; or
(ii) consists of 2 or more related schemes (within the meaning of the Income Tax Assessment Act 1997) where one or more of them is a non‑equity share; or
(iii) is a syndicated loan; or
(iv) is prescribed by the regulations for the purposes of this section; and
(c) either:
(i) the issue of the debenture or debt interest satisfies the public offer test set out in subsection (3) or (4); or
(ii) for a syndicated loan—the invitation to become a lender under the relevant syndicated loan facility satisfies the public offer test set out in subsection (3A);
this section applies to the interest.
Note: Subsection (6) does not apply to the interest because that subsection deals only with interest paid on a debenture or debt interest by the issuing company.
Tax not payable
(2) Tax is not payable under this Division in respect of interest to which this section applies.
Public offer test
(3) The issue of a debenture or debt interest by a company satisfies the public offer test if the issue resulted from the debenture or debt interest being offered for issue:
(a) to at least 10 persons each of whom:
(i) was carrying on a business of providing finance, or investing or dealing in securities, in the course of operating in financial markets; and
(ii) was not known, or suspected, by the company to be an associate (see subsection (9)) of any of the other persons covered by this paragraph; or
(b) to at least 100 persons whom it was reasonable for the company to have regarded as either:
(i) having acquired debentures or debt interests in the past; or
(ii) being likely to be interested in acquiring debentures or debt interests; or
(c) as a result of being accepted for listing on a stock exchange, where the company had previously entered into an agreement with a dealer, manager or underwriter, in relation to the placement of debentures or debt interests, requiring the company to seek such listing; or
(d) as a result of negotiations being initiated publicly in electronic form, or in another form, that was used by financial markets for dealing in debentures or debt interests; or
(e) to a dealer, manager or underwriter, in relation to the placement of debentures or debt interests, who, under an agreement with the company, offered the debenture or debt interest for sale within 30 days in a way covered by any of paragraphs (a) to (d).
(3A) An invitation to become a lender under a syndicated loan facility by a company satisfies the public offer test if the invitation was made:
(a) to at least 10 persons each of whom:
(i) was carrying on a business of providing finance, or investing or dealing in securities, in the course of operating in financial markets; and
(ii) was not known, or suspected, by the company to be an associate (see subsection (9)) of any of the other persons covered by this paragraph; or
(b) publicly in electronic form, or in another form, that was used by financial markets for dealing in debentures or debt interests; or
(c) to a dealer, manager or underwriter, in relation to the placement of debentures or debt interests, who, under an agreement with the company, made the invitation to become a lender under the facility within 30 days in a way covered by paragraph (a) or (b).
Global bonds
(4) The issue of a debenture or debt interest by a company also satisfies the public offer test if the debenture or debt interest is a global bond (see subsection (10)).
Issues and invitations that always fail the public offer test
(5) The issue of a debenture or debt interest by a company does not satisfy the public offer test if, at the time of the issue, the company knew, or had reasonable grounds to suspect, that:
(a) the debenture, an interest in the debenture or the debt interest was being, or would be, acquired either directly or indirectly by an associate of the company; and
(b) either:
(i) the associate is a non‑resident and the debenture or interest, or the debt interest, was not being, or would not be, acquired by the associate in carrying on a business in Australia at or through a permanent establishment of the associate in Australia; or
(ii) the associate is a resident of Australia and the debenture or interest, or the debt interest, was being, or would be, acquired by the associate in carrying on a business in a country outside Australia at or through a permanent establishment of the associate in that country; and
(c) the debenture or interest, or the debt interest, was not being, or would not be, acquired by the associate in the capacity of:
(i) a dealer, manager or underwriter in relation to the placement of the debenture or debt interest; or
(ii) a clearing house, custodian, funds manager or responsible entity of a registered scheme.
(5AA) An invitation to become a lender under a syndicated loan facility is taken never to have satisfied the public offer test if, at the time the invitation is made, the company knew, or had reasonable grounds to suspect, that:
(a) an associate of the company is or will become a lender under the facility; and
(b) either:
(i) the associate is a non‑resident and the associate is not or would not become a lender under the facility in carrying on a business in Australia at or through a permanent establishment of the associate in Australia; or
(ii) the associate is a resident of Australia and the associate is or would become a lender under the facility in carrying on a business in a country outside Australia at or through a permanent establishment of the associate in that country; and
(c) the associate is not or would not become a lender under the facility in the capacity of:
(i) a dealer, manager or underwriter in relation to the invitation; or
(ii) a clearing house, custodian, funds manager or responsible entity of a registered scheme.
No exemption for interest paid to certain associates of the issuing company
(6) This section does not apply to interest paid by the company to a person in respect of the debenture or debt interest if, at the time of the payment, the company knows, or has reasonable grounds to suspect, that:
(a) the person is an associate of the company; and
(b) either:
(i) the associate is a non‑resident and the payment is not received by the associate in respect of a debenture or debt interest that the associate acquired in carrying on a business in Australia at or through a permanent establishment of the associate in Australia; or
(ii) the associate is a resident of Australia and the payment is received by the associate in respect of a debenture or debt interest that the associate acquired in carrying on a business in a country outside Australia at or through a permanent establishment of the associate in that country; and
(c) the associate does not receive the payment in the capacity of a clearing house, paying agent, custodian, funds manager or responsible entity of a registered scheme.
Australian public bodies are treated as Australian resident companies
(7) This section applies in relation to a debenture or debt interest issued by:
(a) the Commonwealth, a State or a Territory; or
(b) an authority of the Commonwealth, of a State or of a Territory;
as if the Commonwealth, State, Territory or authority were a company and a resident of Australia.
Debentures or debt interests issued through certain non‑resident subsidiaries can also get the exemption
(8) If:
(a) a company (the parent company) beneficially owns all of the issued equity interests in the capital of a company (the subsidiary) that is not a resident of Australia; and
(b) the subsidiary’s only business is raising finance for the purposes of the parent company; and
(c) the subsidiary raises finance in the United States of America or in another country specified in the regulations (but not Australia) by issuing a debenture or debt interest in that country; and
(d) when the debenture or debt interest is issued, the subsidiary is treated as a resident of that country for the purposes of the tax law (see subsection (9)) of the country;
then this section has effect as if the parent company had raised the finance and issued the debenture or debt interest.
Definitions
(9) In this section:
associate has the meaning given by section 318, except that paragraphs (1)(b), (2)(a) and (4)(a) of that section must be disregarded.
clearing house means a person who operates a facility that is used by financial markets for investing in or dealing in securities.
company includes a company in the capacity of trustee of a resident trust estate if:
(a) the trust is not a charity; and
(b) the only person who is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust is a company other than a company in the capacity of trustee.
debenture, without affecting its meaning elsewhere in this Act, includes a promissory note or a bill of exchange (in addition to the things mentioned in the definition of debenture in subsection 6(1)).
global bond has the meaning given by subsection (10).
registered scheme has the same meaning as in the Corporations Act 2001.
responsible entity, of a registered scheme, has the same meaning as in the Corporations Act 2001.
syndicated loan means a loan or other form of financial accommodation that is provided under a syndicated loan facility, being a facility that has 2 or more lenders.
syndicated loan facility has the meaning given by subsections (11), (12) and (13).
tax law, in relation to a country other than Australia, means:
(a) if the country has federal foreign tax—the law of the country that imposes the federal foreign tax; or
(b) in any other case—the law of the country that imposes foreign tax.
Global bond
(10) A debenture or debt interest issued by a company is a global bond if:
(a) it describes itself as a global bond or a global note; and
(b) it is issued to a clearing house (see subsection (9)) or to a person as trustee or agent for, or otherwise on behalf of, one or more clearing houses; and
(c) in connection with the issue, the clearing house or houses:
(i) confer rights in relation to the debenture or debt interest on other persons; and
(ii) record the existence of the rights; and
(d) before the issue:
(i) the company; or
(ii) a dealer, manager or underwriter, in relation to the placement of debentures or debt interests, on behalf of the company;
announces that, as a result of the issue, such rights will be able to be created; and
(e) the announcement is made in a way or ways covered by any of paragraphs (3)(a) to (e) (reading a reference in those paragraphs to “debentures or debt interests” as if it were a reference to such a right, and a reference to the “company” as if it included a reference to the dealer, manager or underwriter); and
(f) under the terms of the debenture or debt interest, interests in the debenture or debt interest are able to be surrendered, whether or not in particular circumstances, in exchange for other debentures or debt interests issued by the company that are not themselves global bonds.
(11) A written agreement is a syndicated loan facility if:
(a) the agreement describes itself as a syndicated loan facility or syndicated facility agreement; and
(b) the agreement is between one or more borrowers and at least 2 lenders; and
(c) under the agreement each lender severally, but not jointly, agrees to lend money to, or otherwise provide financial accommodation to, the borrower or borrowers; and
(d) the amount to which the borrower or borrowers will have access at the time the first loan or other form of financial accommodation is to be provided under the agreement is at least $100,000,000 (or a prescribed amount).
(12) A written agreement is also a syndicated loan facility if:
(a) the agreement describes itself as a syndicated loan facility or syndicated facility agreement; and
(b) the agreement is between one or more borrowers and one lender where the agreement provides for the addition of other lenders; and
(c) the agreement provides that, when other lenders are added, each lender severally, but not jointly, agrees to lend money to, or otherwise provide financial accommodation to, the borrower or borrowers; and
(d) the amount to which the borrower or borrowers will have access at the time the first loan or other form of financial accommodation is to be provided under the agreement is at least $100,000,000 (or a prescribed amount).
(13) However, an agreement under which there are 2 or more borrowers is a syndicated loan facility only if all of them are:
(a) members of the same wholly‑owned group (within the meaning of the Income Tax Assessment Act 1997); or
(b) parties to the same joint venture; or
(c) associates of each other.
(14) For the purposes of this section, a change (including by novation) to the lenders under a syndicated loan facility does not result in a different agreement.
(15) For a debt interest that consists of 2 or more related schemes (within the meaning of the Income Tax Assessment Act 1997) where one or more of them is a non‑equity share, this section applies only to interest paid in respect of the non‑equity share.
Note: Subsection 128A(1AB) defines interest for the purposes of this Division. Under that subsection, dividends paid in respect of a non‑equity share are treated as being interest.
(16) The rule in subsection (15) does not apply to the extent that interest in respect of the other related scheme or schemes would be interest to which this section applies in respect of a debenture or debt interest.
128FA Division does not apply to interest on certain publicly offered unit trust debentures or debt interests
Interest to which this section applies
(1) This section applies to interest paid by the trustee of an eligible unit trust in respect of a debenture or debt interest issued by the trustee if:
(a) for a debt interest other than a debenture—the debt interest:
(i) is a syndicated loan; or
(ii) is prescribed by the regulations for the purposes of this section; and
(b) either:
(i) the issue of the debenture or debt interest satisfies the public offer test set (see subsection (6)); or
(ii) for a syndicated loan—the invitation to become a lender under the relevant syndicated loan facility satisfies the public offer test (see subsection (6A)).
(2) If:
(a) some or all of the transfer price (within the meaning of section 128AA) of a debenture or debt interest issued by the trustee of an eligible unit trust is taken under that section to be income that consists of interest; and