The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Helen Coonan

Helen Coonan

Minister for Revenue and Assistant Treasurer

26 November 2001 - 17 July 2004

Media Release of 11/05/2004

C030/04

11 May 2004

FOREIGN RESIDENT WITHHOLDING ARRANGEMENTS

The Government has decided the first three groups of payments to be covered by the new foreign resident withholding arrangements, the Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, announced today.

“The new withholding arrangements will facilitate the efficient collection of Australian income tax from foreign residents by requiring entities making certain prescribed payments to foreign residents to withhold amounts from the payments. This will improve the compliance of foreign residents with their Australian income tax obligations,” Senator Coonan said.

The framework legislation for foreign resident withholding became law in June 2003 and provides that withholding is required from payments to foreign residents that are prescribed in the regulations.

Payments for promoting or organising casino gaming junket arrangements will be prescribed. These are arrangements for bringing people to a casino to gamble or for arranging for people to go to a casino to gamble. The rate of withholding will be three per cent.

Payments for entertainment and sports activities will be prescribed. These are payments for activities of a performing artist or sportsperson, including payments to support staff for certain activities, such as an art director, bodyguard, coach, hairdresser or personal trainer. The rate of withholding will be the company tax rate, currently 30 per cent, where the entity receiving the payment is a company. Where the entity is an individual, the marginal rates for foreign residents will apply.

Payments under contracts for the construction, installation and upgrading of buildings, plant and fixtures and for associated activities will also be prescribed. Withholding will only apply to payments under contracts entered into after 30 June 2004. The rate of withholding will be five per cent.

Senator Coonan said that “the new arrangements improve the collection of existing income tax obligations and the regulations will take into account the circumstances of the affected industries and minimise the compliance burden on Australian businesses.” The decision follows targeted consultation with key stakeholders in the affected industries.

The payments for the first three groups will be prescribed in the regulations for withholding to commence from 1 July 2004.

In addition, the Government has amended the pay as you go withholding rules to clarify that entities are to withhold amounts from certain prescribed payments to foreign resident entities. Withholding will be required for alienated personal services payments included in the assessable income of an individual.

“The Government has made this change to ensure that tax is collected by withholding from these payments before the funds concerned leave Australia. Without the change there is a risk that the tax would not be paid and would be difficult to recover after the funds have left Australia,” Senator Coonan said.

This measure took effect from 23 March 2004 which is the date of Royal Assent of the amending Act, the Taxation Laws Amendment Act (No. 2) 2004.