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New International Tax Arrangements Bill 2003
Schedule 2 Interest withholding tax exemption for certain unit trusts

   

Income Tax Assessment Act 1936

1  Subsection 25(2)

After “company”, insert “or an eligible unit trust within the meaning of section 128FA”.

2  After paragraph 128AAA(2)(b)

Insert:

                    (ba)  section 128FA; and

3  Subparagraph 128B(3)(h)(iv)

After “128F,”, insert “128FA,”.

4  Section 128D

After “section 128F,”, insert “section 128FA,”.

5  After section 128F

Insert:

128FA   Division does not apply to interest on certain publicly offered unit trust debentures

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 issued by the trustee if the issue of the debenture satisfies the public offer test (see subsection (6)).

             (2)  If:

                     (a)  some or all of the transfer price (within the meaning of section 128AA) of a debenture issued by the trustee of an eligible unit trust is taken under that section to be income that consists of interest; and

                     (b)  the issue of the debenture satisfies the public offer test (see subsection (6));

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 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 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 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 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 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 shares 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 in that country; and

                     (d)  when the debenture 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.

When the issue of a debenture satisfies the public offer test

             (6)  For the purposes of working out under this section whether the issue of a debenture 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.

             (7)  For the purposes of applying subsections 128F(3) to (5) as mentioned in subsection (6) 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).

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 Part IX) of a complying superannuation fund, within the meaning of the Income Tax Assessment Act 1997 , 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 Part IX) of a complying approved deposit fund within the meaning of the Income Tax Assessment Act 1997 ; 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 102G.

registered scheme has the same meaning as in section 128F.

responsible entity 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.

Note:       The heading to section 128F is amended by inserting “ company ” after “ publicly offered ”.

6  Application

The amendments made by this Schedule apply to debentures issued on or after the day on which this Act commences.