Australia: Tax File Number (TFN) withholding tax rate reduced from 49% to 47%

05.07.2017

Clearstream Banking1 would like to inform customers that effective

immediately

the Tax File Number (TFN) withholding tax rate is reduced from 49% to 47%.

Background

In 2014, the Australian government temporarily increased the TFN withholding tax rate by 2%. Clearstream Banking has been informed that effective 1 July 2017 the 2% increase of the withholding tax rate was abolished.

Impact on customers

For all income payments processed from 1 July 2017, on behalf of Australian residents, the below will apply.

Debt securities

Exemption at source is available to beneficial owners who qualify as residents of Australia, in accordance with the Income Tax Assessment Act 1936. The 0% rate of withholding tax is applied on condition that their Tax File Number (TFN) or Australian Business Number (ABN) and the appropriate documentation are provided to Clearstream Banking.

The 47% rate of withholding tax may be applied, upon request from the customer, if the underlying final beneficial owner is an undisclosed Australian resident and no ABN/TFN is provided.

Equities

Unfranked components

Exemption at source is available to beneficial owners who qualify as residents of Australia, in accordance with the Income Tax Assessment Act 1936. The 0% rate of withholding tax is applied on condition that their Tax File Number (TFN) or Australian Business Number (ABN) and the appropriate documentation are provided to Clearstream Banking.

The 47% rate of withholding tax may be applied, upon request from the customer, if the underlying final beneficial owner is an undisclosed Australian resident and no ABN/TFN is provided.

Franked components

No certification is required to obtain exemption for franked components for Australian resident beneficial owners.

Managed Investment Trusts (MITs)

Interest and franked/unfranked components (Tax Assessment Act 1936)

Exemption at source is available to beneficial owners who qualify as residents of Australia, in accordance with the Income Tax Assessment Act 1936. The 0% rate of withholding tax is applied on condition that the Tax File Number (TFN) or Australian Business Number (ABN) and the appropriate documentation are provided to Clearstream Banking.

The 47% rate of withholding tax may be applied, upon request from the customer, if the underlying final beneficial owner is an undisclosed Australian resident and no ABN/TFN is provided.

Important note: Franked dividend components paid from MITs are treated as MIT distributions for the purposes of resident withholding tax for which quotation of ABN/TFN is required in order to obtain the 0% resident tax.

Other income / fund components according to the Australian Taxation Administration Act 1953

Under Section 12, Clearstream Banking Luxembourg is considered to be resident in a non-EOI (Exchange of Information) country and therefore the maximum withholding tax rate is currently applied by default to fund distribution payments.

No relief at source or refund is available through Clearstream Banking to beneficial owners who qualify for the benefit of a reduced rate of withholding tax in accordance with the EOI tax rates.

Any reclaim of MIT withholding tax should be addressed directly to the Australian Tax Authorities (ATO).

Undisclosed Australian residents

Residents of Australia who are not prepared to disclose their identity (by providing their ABN/TFN and other supporting documentation) are considered as "undisclosed Australian residents".

The maximum withholding tax rate of 47% is applied to such beneficial owners who are undisclosed residents of Australia upon request from the customer; no relief at source or refund is available through Clearstream Banking.

Further information

The Market Taxation Guide – Australia will be updated in due course.

For further information, please contact the Clearstream Banking Tax Help Desk, Clearstream Banking Client Services or your Relationship Officer.
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1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking Frankfurt (CBF) customers using CreationOnline), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.