WHT On Interest Removed From Australian Government Bonds

by Mary Swire, Tax-News.com, Hong Kong

26 August 2009

The Australian government has announced the removal of withholding tax on interest paid to non-residents on federal Commonwealth Government securities.

It was stated that this removal of withholding tax will address the anomaly that has existed since its removal from publicly-issued corporate bonds in 1999 and state government securities in 2008. It will also bring Australia's tax treatment of federal government securities into line with most other countries, including the US and the UK.

The country’s Assistant Treasurer, Nick Sherry, also said that, removing this anomaly would help improve the neutrality of the tax system and improve the efficiency of the country’s financial markets. It would, he added, also increase the attractiveness of the securities in global financial markets.

The forgone tax revenue will, according to the government, largely be offset by savings in interest paid on Commonwealth Government Securities.

These changes will make Commonwealth Government Securities eligible for exemption from IWT under section 128F of the Income Tax Assessment Act 1936, and will apply to interest paid after the day the bill receives Royal Assent.

The Government will introduce the legislation during the current Spring sittings of Parliament, with a view to receiving Royal Assent before the end of the year.

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