There have been changes made to MIT Withholding Tax. This document provides an overview of the impact of these changes on investors.

An overview of Withholding Tax and the Changes

• Withholding tax is applied to certain Managed Investment Trust (MIT) income paid to a non-resident of Australia. The legislation refers to a Managed Fund as a Managed Investment Trust (MIT).
• Several changes to this tax have been announced over the last year, including a reduction in the tax rate for certain countries and a flat tax across foreign entity types.
• The current MIT withholding tax legislation was passed into law in June 2008. The legislation covered changes to the MIT withholding tax that is applied to certain income earned by non-residents. These changes simplified and in many cases reduced the amount of tax applied.
• The rate of withholding tax applied to Australian non-residents now depends on the country of residence of the investor to whom the income was paid. The Government has supplied a list of those countries whose residents will receive a lower rate of tax. The countries that attract the lower rate of interest are those that we have an Exchange of Information (EOI) Agreement. The residents of all other countries will have a higher rate of MIT withholding tax applied.
• Note that if you advise us that your residential address is overseas (or have arranged with us to pay distributions into an overseas bank account) we are required to deduct withholding tax. BT is obliged to deduct withholding tax from distributions containing interest, dividend and/or MIT income, where a non-Australian residential address has been provided by an investor.
• The withholding tax rate on certain MIT distributions will be reduced to 22.5% in the 2008-2009 financial year (first income year), 15% for the second income year (2009-2010) and 7.5% for the third year (2010-2011) for investors of EOI countries.
  
  Please note that only EOI countries receive the reductions above in the tax rate from the 2008-2009 financial year. Non-EOI countries will remain at 30%.
  
  
• The new legislation articulates who is responsible for withholding the tax. The person or entity that pays the income to the foreign resident is the entity responsible for withholding the tax and paying it to the ATO. For example, this includes Australian residents invested in our products who then remit funds overseas, as agents. BT publishes information necessary for retail investors to calculate this tax.
• If you require further information about your personal tax position, we suggest you consult your accountant or tax adviser. In addition, further information can be obtained from the sources below:
  • ATO notice of press release
  • Link to the list of countries that will attract the lower rate

The information in this article is current as at 15 July 2008. The taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and their interpretation. Your individual situation may differ and you should seek independent professional tax advice on any taxation matters.