Australian MIT Withholding Rates

10 June 2010

Non resident investors in Australian managed investment trusts (MITs) are subject to a final withholding tax on fund payments made by the MIT. Fund payments exclude payments of interest, dividends, royalties, capital gains and amounts not from an Australian source. These amounts are subject to separate tax rules and withholdings. Typically fund payments therefore include rental income and other Australian sourced income derived by the MIT.

The rate of MIT withholding varies based on whether the non resident is tax resident in a country that has entered tax information exchange arrangements with Australia and is listed in the Tax Administration Regulations, 1976. Tax information exchange provisions may be included as part of Australia's double tax treaties (tax treaties) or as part of a separate tax information exchange agreement (TIEA). Although Australia has information exchange provisions with over 60 countries, only 37 have been included in the Regulations (at the time of writing). The Government announced as part of the 2010-2011 Budget that the regulations will be updated to include:

  • Antigua and Barbuda

  • the British Virgin Islands

  • the Isle of Man; and

  • Jersey

The expectation is that the remaining IEA countries will be introduced to the MIT withholding list as soon as possible but this would usually need to go through the Budgetary process (the Australian Budget is announced in May of each calendar year).  Accordingly, this can take some time to complete and until the countries are included in the regulations, the reduced MIT withholding rates do not apply.  Importantly therefore, non resident investors need to confirm whether their country of residence is included on the MIT withholding list.

Tax Treaties

Australia has entered into taxation treaties with more than 40 countries. Tax treaties [which are also referred to as tax conventions or double tax agreements (DTAs)] prevent double taxation and fiscal evasion, fostering cooperation between Australia and other international tax authorities by enforcing their respective tax laws. A non resident will only be affected by a tax treaty if they are a of the other treaty country.

Tax Information Exchange Agreements (TIEAs)

TIEAs are bilateral agreements which allow information relating to a participating partner to be given to a tax authority of another country. Under the TIEAs, treaty partners must have legal and administrative frameworks in place to support their commitment to exchange information. For example, the ability to exchange information cannot be hindered by restrictions such as bank secrecy laws, or a limitation to only be able to acquire and hence exchange information that is necessary for their domestic tax administration. The Organisation for Economic Cooperation and Development (OECD) has proposed this process to allow revenue authorities in various countries and jurisdictions to commit to eliminate harmful tax practices.

Tax Treaty Countries

Australia has a tax treaty with the countries noted below. Each treaty country that is included as part of the MIT withholding regulations attracts the reduced MIT withholding rates. Other countries (shaded in grey) are not included in the regulations and currently attract the 30% final MIT withholding rate.  Some of these tax treaties (notably Switzerland) do not include information exchange provisions and therefore are not expected to be eligible for reduced MIT withholding rates. However residents of the remaining countries will only be eligible for reduced MIT withholding rates when and if the regulations are amended to include these countries. As noted above, this can take some time to complete.

  Tax Treaty Entered into Force Included in the MIT withholding tax regulations MIT withholding rate from 1 July 2008 – 30 June 2009 MIT withholding rate from 1 July 2010
Argentina Y Y Y 15% 7.5%
Austria Y Y N 30% 30%
Belgium Y Y N 30% 30%
Canada Y Y Y 15% 7.5%
China Y Y Y 15% 7.5%
Chile Y N N 30% 30%
Czech Republic Y Y Y 15% 7.5%
Denmark Y Y Y 15% 7.5%
Fiji Y Y Y 15% 7.5%
Finland Y Y Y 15% 7.5%
France Y Y Y 15% 7.5%
Germany Y Y Y 15% 7.5%
Hungary Y Y Y 15% 7.5%
India Y Y Y 15% 7.5%
Indonesia Y Y Y 15% 7.5%
Ireland Y Y Y 15% 7.5%
Italy Y Y Y 15% 7.5%
Japan Y Y Y 15% 7.5%
Kiribati Y Y Y 15% 7.5%
Malaysia Y Y N 30% 30%
Malta Y Y Y 15% 7.5%
Mexico Y Y Y 15% 7.5%
Netherlands Y Y Y 15% 7.5%
New Zealand Y Y Y 15% 7.5%
Norway Y Y Y 15% 7.5%
Papua New Guinea Y Y Y 15% 7.5%
Philippines Y Y N 30% 30%
Poland Y Y Y 15% 7.5%
Romania Y Y Y 15% 7.5%
Russia Y Y Y 15% 7.5%
Singapore Y Y N 30% 30%
Slovakia Y Y Y 15% 7.5%
South Africa Y Y Y 15% 7.5%
South Korea Y Y N 30% 30%
Spain Y Y Y 15% 7.5%
Sri Lanka Y Y Y 15% 7.5%
Sweden Y Y Y 15% 7.5%
Switzerland Y Y N 30% 30%
Taipei Y Y Y 15% 7.5%
Thailand Y Y Y 15% 7.5%
Turkey Y Y N 30% 30%
United Kingdom Y Y Y 15% 7.5%
United States Y Y Y 15% 7.5%
Vietnam Y Y Y 15% 7.5%

 

Copies of the agreements are available on the Treasury website.

TIEA Countries

Australia has TIEAs with the countries noted below. Each TIEA country that is included as part of the MIT withholding regulations attracts the reduced MIT withholding rates. Other countries (shaded in grey) are not included in the regulations and currently attract the 30% withholding rate. Residents of the countries shaded in grey will only be eligible for reduced MIT withholding rates when and if the regulations are amended to include these countries. The Government announced as part of the 2010-2011 Budget that the regulations will be updated to include:

  • Antigua and Barbuda

  • the British Virgin Islands

  • the Isle of Man; and

  • Jersey

The expectation is that the remaining IEA countries will be introduced to the MIT withholding list as soon as possible but this would usually need to go through the Budgetary process and accordingly can take some time.

Name of Country Tax Information Exchange Agreement Entered into Force Included in the MIT withholding tax regulations MIT withholding rate from 1 July 2009 – 30 June 2010 MIT withholding rate from 1 July 2010
Anguilla Y N N 30% 30%
Antigua and Barbuda Y Y N 30% 30%
Aruba ¶ Y N N 30% 30%
Bahamas Y N N 30% 30%
Belize Y N N 30% 30%
Bermuda Y Y Y 15% 7.5%
British Virgin Islands Y N N 30% 30%
Cayman Islands Y N N 30% 30%
Cook Islands ¶ Y N N 30% 30%
Dominica Y N N 30% 30%
Gibraltar Y N N 30% 30%
Grenada Y N N 30% 30%
Guernsey ¶ Y N N 30% 30%
Isle of Man ¶ Y Y N 30% 30%
Jersey Y Y N 30% 30%
Monaco Y N N 30% 30%
Netherlands Antilles Y Y Y 15% 7.5%
Samoa Y N N 30% 30%
San Marino Y N N 30% 30%
St. Kitts & Nevis Y N N 30% 30%
St Lucia Y N N 30% 30%
St. Vincent and the Grenadines Y N N 30% 30%
Turks and Caicos Islands Y N N 30% 30%

These countries have signed an Agreement for the Allocation of Taxing Rights with Respect to Certain Income of Individuals with Australia.

Copies of the agreements can also be found on the Treasury website.