Financial Services

Payments to Non-Residents Policy

Further information

Payments to a non-resident by the University under an agreement may impose tax obligations on the University.

These payments may result in the University having to withhold and remit to the Australian Taxation Office (ATO) Pay As You Go (PAYG) withholding tax.

PAYG withholding tax

Under the Australian PAYG withholding system, a person who makes certain kinds of payments must withhold an amount from the payment and pay that amount to the ATO. PAYG withholding tax applies to certain payments made to non-residents of Australia.

The PAYG withholding tax represents a first and final tax on income, which means that income subject to PAYG withholding tax will not be subject to any other form of taxation in Australia.

Subject to a number of exclusions, PAYG withholding tax is required to be deducted from the following types of payments made to non-residents of Australia:

  • interest
  • royalties
  • dividends (not applicable to the University)

The University, as the payer of interest or royalty, is required to deduct the PAYG withholding tax at the applicable rate and remit the tax to the Australian Taxation Office.

There is the potential for major penalties if the University fails to deduct and/or remit PAYG withholding tax.

Interest

PAYG withholding tax is imposed at the flat rate of 10 per cent of the gross amount of interest paid to a non-resident. The rate of PAYG withholding tax is 10 per cent regardless of whether Australia has entered into a Double Tax Agreement (DTA) with the relevant country.

Royalties

PAYG Withholding tax is also required to be deducted from royalties paid to non-residents of Australia. The standard rate of deduction is 30 per cent, but this may be reduced pursuant to the provisions of a DTA.

Unlike dividends and interest, amounts constituting royalties may often be difficult to identify. It is therefore essential that any agreements providing for payments to non-residents be carefully reviewed to ascertain whether the payments constitute royalties.