(b) 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
(c) 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));
this section applies to the interest.
Note: Subsection (4) does not apply to the interest because that subsection deals only with interest paid on a debenture or debt interest by the issuing eligible unit trust.
Tax not payable
(3) Tax is not payable under this Division in respect of interest to which this section applies.
No exemption for interest paid to certain associates of the issuing trustee
(4) This section does not apply to interest paid by the trustee of an eligible unit trust to a person in respect of the debenture or debt interest if, at the time of the payment, the trustee knows, or has reasonable grounds to suspect, that:
(a) the person is an associate of the trustee; 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.
Debentures or debt interests issued through certain non‑resident subsidiaries can also get the exemption
(5) If:
(a) the trustee of an eligible unit trust holds all of the issued equity interests in the capital of a company that is not a resident of Australia; and
(b) the company’s only business is raising finance for the purposes of the eligible unit trust; and
(c) the company raises finance in a 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 company is treated as a resident of that country for the purposes of the tax law (see subsection (8)) of the country;
then this section has effect as if the trustee had raised the finance and issued the debenture or debt interest.
Public offer test
(6) For the purposes of working out under this section whether the issue of a debenture or debt interest by the trustee of an eligible unit trust satisfies the public offer test, subsections 128F(3) to (5) apply to the trustee of the eligible unit trust in a corresponding way to the way in which those subsections apply to a company, subject to subsection (7) of this section.
(6A) For the purposes of working out under this section whether an invitation to become a lender under a syndicated loan facility satisfies the public offer test, subsections 128F(3A) and (5AA) apply to the trustee of the eligible unit trust in a corresponding way to the way in which those subsections apply to a company, subject to subsection (7) of this section.
(7) For the purposes of applying subsection 128F(3), (3A), (4), (5) or (5AA) as mentioned in subsection (6) or (6A) of this section:
(a) a reference in any of those subsections to a company knowing, suspecting or having reasonable grounds to suspect something, or it being reasonable for a company to have regarded something, is taken to be a reference to the trustee of the eligible unit trust knowing, suspecting or having reasonable grounds to suspect that thing, or it being reasonable for the trustee of the eligible unit trust to have regarded that thing; and
(b) a reference in any of those subsections to an associate is taken to be a reference to an associate within the meaning of this section; and
(c) a reference in any of those subsections to a global bond is taken to be a reference to a global bond within the meaning of subsection 128F(10).
(7A) 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.
Definitions
(8) In this section:
associate has the meaning given by section 318, except that:
(a) paragraphs (1)(b), (2)(a) and (4)(a) of that section must be disregarded; and
(b) subsection (5) of that section applies to a unit trust mentioned in paragraph (b) of the definition of eligible unit trust in this subsection in the same way as that subsection applies in relation to a public unit trust.
clearing house has the same meaning as in section 128F.
company has the same meaning as in section 128F.
debenture:
(a) in relation to the trustee of an eligible unit trust, includes debenture stock, bonds, promissory and other notes, bills of exchange and any other securities issued by the trustee, whether constituting a charge on the assets of the eligible unit trust or not; and
(b) in relation to a company, has the same meaning as in section 128F.
eligible unit holder means:
(a) the trustee of a public unit trust; or
(b) the trustee (within the meaning of the Income Tax Assessment Act 1997) of a complying superannuation fund that has 50 or more members; or
(c) the trustee of a pooled superannuation trust within the meaning of the Income Tax Assessment Act 1997; or
(d) the trustee (within the meaning of the Income Tax Assessment Act 1997) of a complying approved deposit fund; or
(e) a life insurance company within the meaning of the Income Tax Assessment Act 1997; or
(f) a public company within the meaning of section 103A; or
(g) the trustee of a unit trust in which all of the issued units are held by 2 or more entities that are eligible unit holders because of:
(i) the application of another paragraph of this definition (whether or not the same paragraph); or
(ii) a previous application of this paragraph; or
(iii) any combination of subparagraphs (i) and (ii).
eligible unit trust means:
(a) a public unit trust; or
(b) a unit trust in which all of the issued units are held by 2 or more eligible unit holders.
public unit trust has the same meaning as in section 102P (disregarding subsection (2) of that section).
registered scheme has the same meaning as in section 128F.
responsible entity has the same meaning as in section 128F.
syndicated loan has the same meaning as in section 128F.
syndicated loan facility has the same meaning as in section 128F.
tax law has the same meaning as in section 128F.
(9) For the purposes of this section, a trust or fund of a kind mentioned in any of paragraphs (a) to (d) of the definition of eligible unit holder in subsection (8) in relation to a year of income is taken to be a trust or fund of that kind at all times during the year of income.
128GB Division not to apply to interest payments on offshore borrowings by offshore banking units
(1) This section applies to:
(a) interest paid by a person in respect of an offshore borrowing of the person; or
(b) interest consisting of gold paid by a person in respect of an offshore gold borrowing of the person;
if, when the borrowing took place, the person was an offshore banking unit (whether or not the person is still an offshore banking unit when the interest is paid).
(1A) However, this section does not apply to:
(a) interest paid on or after 1 January 2024; and
(b) interest consisting of gold paid on or after 1 January 2024.
(2) Tax is not payable in accordance with this Division in respect of interest to which this section applies.
128NA Special tax payable in respect of certain securities and agreements
(1) Where, but for subsection 128AA(2):
(a) the transferor of a qualifying security who is not liable to pay withholding tax in relation to the transfer of the qualifying security would be liable to pay withholding tax in relation to the transfer; or
(b) the transferor of a qualifying security who is liable to pay withholding tax in relation to the transfer of the qualifying security would be liable to pay additional withholding tax in relation to the transfer;
then, for the purposes of this section, there shall be taken to be an avoided withholding tax amount in relation to the person who is the transferee of the qualifying security of an amount equal to the withholding tax or the additional withholding tax, as the case may be, that the person would be so liable to pay.
(2) Where:
(a) an attributable agreement payment or attributable agreement payments were made by a person under a relevant agreement before the commencement of section 128AC; and
(b) the Commissioner is of the opinion that the payment or payments were made before the commencement of that section, or that the payment or payments were of a greater amount than they would otherwise have been, for the sole or dominant purpose of securing the result that the total amount (in this subsection referred to as the actual withholding tax) of withholding tax payable under that section in relation to all attributable agreement payments made under the relevant agreement after the commencement of that section would be less than the amount (in this subsection referred to as the notional withholding tax) that would otherwise have been payable;
then, for the purposes of this section, there shall be taken to be an avoided withholding tax amount in relation to the person of an amount equal to the amount by which the notional withholding tax exceeds the actual withholding tax.
(3) For the purposes of subsection (2), expressions used in that subsection that are also used in section 128AC have the same respective meanings in that subsection as in that section.
(4) Where there is an avoided withholding tax amount in relation to a person under this section, the person is liable to pay income tax, as imposed by the Income Tax (Securities and Agreements) (Withholding Tax Recoupment) Act 1986, in respect of the avoided withholding tax amount.
128NB Special tax payable in respect of certain dealings by current and former offshore banking units
(1) Where a person who is or has been an offshore banking unit transfers to another person an amount of tax exempt loan money or tax exempt gold, other than by way of:
(a) payment in carrying on an OB activity or what would be an OB activity if the person were an OBU; or
(b) repayment of an offshore borrowing or offshore gold borrowing;
the person is liable to pay income tax, as imposed by the Income Tax (Offshore Banking Units) (Withholding Tax Recoupment) Act 1988, on the lost withholding tax amount in respect of the transfer.
(2) For the purposes of subsection (1), the lost withholding tax amount in respect of the transfer is an amount ascertained in accordance with the formula:
Start formula IWT rate times PB rate times PB term times TA end formula
where:
IWT rate is the rate declared by the Parliament in respect of income to which subsection 128B(5) applies.
PB rate is the prevailing borrowing rate in relation to the person at the time of the transfer.
PB term is the number of years in the prevailing borrowing term in relation to the person at the time of the transfer; and
TA is the amount of tax exempt loan money or tax exempt gold transferred.
(3) Tax under this section is due and payable by the person liable to pay the tax at the end of:
(a) 21 days after the end of the month in which the transfer to which it relates takes place; or
(b) such further period as the Commissioner, in special circumstances, allows.
Application
(3A) The Commissioner must not exercise his or her power under paragraph (3)(b) on or after 1 July 2000.
Note: For provisions about collection and recovery of tax on or after 1 July 2000, see Part 4‑15 in Schedule 1 to the Taxation Administration Act 1953.
(4) Section 128C (other than subsections (1) and (4AA)) applies, in addition to its application apart from this subsection, as if references in that section to withholding tax were references to tax payable under this section.
(5) The Commissioner may remit the whole or part of an amount of tax payable under this section in relation to the transfer of an amount of tax exempt loan money or tax exempt gold to another person if:
(a) the Commissioner is satisfied that:
(i) the liability to pay the amount of tax arose because the person mistakenly believed, on reasonable grounds, that the other person was a non‑resident or an offshore banking unit, that interest payable to the person in respect of the amount transferred would be an outgoing of a particular kind or that the amount transferred was not tax exempt loan money or tax exempt gold; and
(ii) the person had taken reasonable steps to ascertain the matter to which the mistaken belief related; or
(b) the Commissioner is satisfied that there are special circumstances justifying the remission of the whole or part of the amount of tax.
128NBA Credits in respect of amounts assessed in relation to certain financial arrangements
When section applies
(1) This section applies if:
(a) the amount of any withholding tax that has become payable by a taxpayer on a payment of interest under, or in relation to the transfer of, a qualifying security or a Division 230 financial arrangement has been paid; and
(b) there is a net financial arrangement amount (see subsection (5)) in relation to the taxpayer in relation to:
(i) if the payment of interest is a payment in relation to the transfer of the qualifying security—the security; or
(ii) if the payment of interest is such a payment by virtue of the application of section 128AC in relation to an attributable agreement payment within the meaning of that section—the attributable agreement payment; or
(iii) in any other case—the payment of interest; and
(c) the amount of the withholding tax payable on the interest exceeds the amount that would have been payable on the interest if the interest were reduced by the net financial arrangement amount.
Entitlement to apply for credit
(2) The taxpayer may apply to the Commissioner for a credit of an amount equal to the excess.
Requirements for application
(3) The application must be in the approved form.
Entitlement to credit
(4) If the Commissioner is satisfied as to the matters mentioned in paragraphs (1)(a), (b) and (c), the applicant is entitled to a credit of an amount equal to the excess.
Net financial arrangement amount
(5) For the purposes of this section, if:
(a) in the case of a qualifying security—the sum of all amounts (if any) included in the assessable income of the taxpayer of any years of income in relation to the qualifying security, attributable agreement payment or payment of interest under section 159GQ; or
(b) in the case of a Division 230 financial arrangement—the sum of all amounts (if any) included in the assessable income of the taxpayer of any years of income in relation to the arrangement under Division 230 of the Income Tax Assessment Act 1997;
exceeds:
(c) in the case of a qualifying security—the sum of all amounts (if any) allowable as deductions from the assessable income of the taxpayer of any years of income in relation to the security or the payment, as the case may be, under that section; or
(d) in the case of a Division 230 financial arrangement—the sum of:
(i) all amounts (if any) allowable as deductions from the assessable income of the taxpayer of any years of income in relation to the arrangement under Division 230 of the Income Tax Assessment Act 1997; and
(ii) all amounts (if any) of interest paid under the arrangement before the interest mentioned in paragraph (1)(a) is paid;
there is a net financial arrangement amount equal to the excess.
(6) For the purposes of paragraph (5)(b) and subparagraph (5)(d)(i), disregard any year of income in which the taxpayer was not an Australian resident.
(7) For the purposes of subsection (6):
(a) if section 230‑485 of the Income Tax Assessment Act 1997 applies in relation to a year of income:
(i) treat the foreign residency period mentioned in that section as a year of income in which the taxpayer was not an Australian resident; and
(ii) treat the Australian residency period mentioned in that section as a year of income in which the taxpayer was an Australian resident; and
(b) if section 230‑490 of that Act applies in relation to a year of income:
(i) treat the period during that year in which the taxpayer was not an Australian resident as a year of income in which the taxpayer was not an Australian resident; and
(ii) treat the period during that year in which the taxpayer was an Australian resident as a year of income in which the taxpayer was an Australian resident.
128P Objections
If an applicant for a certificate under this Division is dissatisfied with a decision of the Commissioner:
(a) in any case—to refuse to issue the certificate; or
(b) in the case of a certificate under section 128AB—to specify a particular amount in the certificate;
the applicant may object against the decision in the manner set out in Part IVC of the Taxation Administration Act 1953.
128R Informal arrangements
For the purposes of this Division, the Commissioner may have regard to arrangements, understandings and practices not having legal force in the same manner as if they had legal force.
Division 11C—Payments in respect of mining operations on Indigenous land
128U Interpretation
(1) In this Division, unless the contrary intention appears: