Australia: Statement of practice on variation to foreign resident withholding regime

The Australian Tax Office (hereinafter ATO) has issued Practice Statement PS LA 2006/10 on the administration of the foreign resident withholding regime. The Statement allows the ATO discretion in setting the withholding amounts.

The Australian withholding tax is not the final tax due, non-resident taxpayers do have to file a tax return and may have to pay additional tax or may be entitled to a refund. The withholding tax rate is to be determined on the basis of either the corporate tax rate (for payments to non-resident entities) or the marginal income tax rate (for non-resident individuals). Withholding is inter alia required for payments for entertainment or sports activities (which include payments to support staff whose activities relate to the activity of the performing artist of sports person).

Where the non-resident beliefs that the payment is exempt from Australian tax by virtue of a tax treaty or non-assessable under Australian domestic taxation law, the ATO needs to be contacted to verify this. The foreign entity must complete a Foreign Resident Withholding Variation application for the year in which it will receive the payment(s). Further details and references may be found in the Statement.