ARTICLE · 04 MAY 2007

ATO Changes View On Construction Withholding Tax

Minter Ellison

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The Australian Taxation Office (ATO) has released a ruling (TR 2006/12) which explains its view of the operation of the construction withholding tax provisions.

AustraliaTax

Craig Bowie

The Australian Taxation Office (ATO) has released a ruling (TR 2006/12) which explains its view of the operation of the construction withholding tax provisions.

What is construction withholding tax?

Construction withholding tax was introduced in 2004. It applies to payments for 'works and related activities', which are given extensive definitions in the tax regulations. Broadly speaking, it requires a principal or intermediary to withhold 5 per cent of payments to a foreign contractor under a construction contract, and pay it to the ATO. The 5 per cent can be offset against the foreign contractor's income tax liability for the year, or refunded to the contractor if they are not required to pay Australian tax (say, if a double tax treaty applies to them).

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