Interest on debentures issued by a limited liability partnership and the meaning of 'resident of Australia' for the purposes of the interest withholding tax exemption

Is a limited partnership that is formed in Australia, and is also a 'corporate limited partnership', a 'resident of Australia' for the purposes of the interest withholding tax exemption in subsection 128F(2) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Yes. A limited partnership that is formed in Australia and is also a 'corporate limited partnership' is a 'resident of Australia' for the purposes of the interest withholding tax exemption in subsection 128F(2) of the ITAA 1936.

LP is a limited partnership that was established in Australia by partnership deed and is registered in accordance with the relevant State Government's legislation governing partnerships. LP is also a 'corporate limited partnership' within the meaning of that term in section 94D of the ITAA 1936.

LP proposes to raise funds by issuing certain loan notes offshore and has requested the Commissioner to confirm that the requirements of the subsection 128F(2) of the ITAA 1936 exemption from interest withholding tax will be met by the anticipated issue, in particular, that LP is a 'resident of Australia' as required under subsection 128F(1).

It is assumed for present purposes that, apart from the question whether LP is a 'resident of Australia' for the purposes of the exemption in subsection 128F(2) of the ITAA 1936, all other relevant requirements for the exemption will be met.

Subsection 128F(2) of the ITAA 1936 exempts from withholding tax, interest paid in respect of certain publicly offered debentures. Relevantly, the exemption applies to interest paid by a company in respect of a debenture if the company was a 'resident of Australia' when it issued the debenture and is a 'resident of Australia' when the interest is paid (paragraphs 128F(1)(a) and 128F(1)(b) of the ITAA 1936).

Division 5A of the ITAA 1936 provides for certain limited partnerships to be treated as companies for tax purposes. For the purposes of the Division a limited partnership is a 'corporate limited partnership', in relation to a year of income of the partnership, if it satisfies section 94D of the ITAA 1936. LP satisfies section 94D.

Section 94H of the ITAA 1936 provides that if a partnership is a corporate limited partnership in relation to a year of income the 'income tax law' has effect, in relation to the partnership and in relation to the year of income, subject to the changes set out in Subdivision C of Division 5A of the ITAA 1936. The term 'income tax law', as used in the division, is defined in section 94B to include the ITAA 1936.

Subdivision C of Division 5A of the ITAA 1936 comprises sections 94H to 94Y (inclusive) of the ITAA 1936. Section 94J of the ITAA 1936 has the effect of including a 'corporate limited partnership' in any reference, in the income tax law, to a company or to a body corporate (other than the definitions of 'dividend' and 'resident' or 'resident of Australia', in section 6 of the ITAA 1936).

Section 94T of the ITAA 1936 deals with residence of a corporate limited partnership and relevantly provides that for the purposes of the income tax law a corporate limited partnership is a 'resident of Australia' if and only if the partnership was formed in Australia (paragraph 94T(e)).

LP is a corporate limited partnership and was formed in Australia. Accordingly, by virtue of the provisions of Division 5A of the ITAA 1936, LP is a company that is a resident of Australia for the purposes of the interest withholding tax exemption in subsection 128F(2) of the ITAA 1936.