Section 128F: Common pitfalls and novel issues

Published Date: 20 Feb 2024


The exemption from Australian interest withholding tax in s 128F of the Income Tax Assessment Act 1936 (Cth) plays a critical role in Australia’s debt capital markets. In availing themselves of the exemption, tax practitioners and market participants must navigate a substantial body of “law” (and ATO guidance) and “lore” (ie generally accepted views and practice). In this article, we outline some of the common pitfalls encountered with s 128F, including the requirement that invitations must be made genuinely, and consider its application in several areas on which current guidance is limited, including associate/offshore associate testing and amendments to a syndicated facility agreement. We also outline some high-level considerations on the application of the penalties and interest regime to withholding tax.

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