Withholding for foreign residents: an ATO focus area

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If your business or investment structure make payments such as interest, dividends or royalties to any foreign residents, you may be required to withhold tax from these payments.

If these withholding requirements apply to you, you’ll need to lodge a PAYG annual report or an annual investment income report, and withhold and pay the correct amount of tax.

This is important as the withholding tax obligation arises whether you make the payment to the foreign resident, credit their account, or deal with the payment on their behalf or at their direction. 

There are a number of exemptions that apply, but this can be technical in operation, so it’s recommended to seek advice specific to your circumstances if you make any payments to non-residents.

The ATO is alert to payers who have not withheld and paid amounts (or have withheld and paid incorrect amounts), incorrectly relied on an exemption or treaty relief, or misclassified deductions for interest or royalty payments to an offshore entity.

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