Although Australia generally taxes non-residents on the basis of the source of their income, it also has various withholding tax systems. The most commonly operative of these withholding tax systems applies in relation to dividends, interest and royalties.
The withholding tax system is designed to eliminate administrative burdens and facilitate the collection of tax on dividends, interest and royalties derived by non-residents.
A person liable to pay money to a non-resident is deemed to be the person 'having control' of that money. That person is required to withhold sufficient money to pay taxes due, and is liable for any tax that should have been withheld (plus any interest and penalties on that tax).
Withholding tax rates vary with the type of payment. The TAA Regs require tax is withheld from payments to non-residents at the following rates:
- dividend payments: 30%
- interest payments: 10%
- royalty payments: 30%
If Australia has a double tax agreement with the income recipient's country of residence, the agreement may provide for a lower withholding rate or even an exemption from withholding tax, depending on the specific nature of the payment.
Generally, income tax deductions for payments of interest and royalties subject to withholding tax are not available until such time as the withholding tax has been remitted to the ATO.
If you require assistance, please contact us on (02) 8264-0755
All representations and information on this site is general in nature and should not be relied upon as advice. If you require specific advice please contact us.