Private ruling: Foreign super fund - exemption from withholding tax
Date of advice: 18 December 2025
Published: 9 February 2026
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the Fund excluded from liability to withholding tax on interest, dividend and non-share dividend income derived from its Australian investment(s) in accordance with paragraph 128B(3)(jb) of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: Yes.

Relevant facts and circumstances: The Fund The Fund was established in a foreign country and is administered by the laws of that country. The Fund is administered by a Board of Trustees. The Fund's central management and control is carried outside of Australia by entities none of whom are Australian residents; The Fund was established and maintained to administer a plan to eligible persons who are not Australian residents. The benefits available under the plan are retirement, disability and death benefits. The Fund is exempt from federal income tax in the foreign country. Income paid to the Fund is non-assessable non-exempt. No amounts paid to the fund can be deducted under the ITAA 1997 or the ITAA 1936 and no tax offsets would be allowable for an amount paid to the Fund or set aside for the Fund. Contributions An employee working XX hours or more per week is automatically a member of the Fund. A member contributes a percentage of their base pay, excluding overtime. The employer also contributes to the Fund. Benefits Benefits are determined by a formula which includes the members salary and years of service credit. Contributions are invested by the Fund, under direction of the Board of Trustees, to provide benefits to all present and future members. The Fund provides members with a lifetime retirement benefit once they meet certain eligibility requirements. Retirement eligibility Members are eligible for retirement when they meet a set criteria determined by their age and years of service credit. Vesting A member is considered vested in in the Fund when they have a set amount of years of service credit. Members who leave active membership by terminating their employment cannot withdraw their accumulated contributions if they have less than the set amount of years of service credit as they are considered vested. Disability retirement eligibility Members may apply for disability retirement benefits if: • They are mentally or physically incapacitated for the performance of all employment duties; AND • The incapacity is likely to be permanent.

Relevant legislative provisions: Income Tax Assessment Act 1936 section128B | Income Tax Assessment Act 1936 section 128D | Income Tax Assessment Act 1997 section 118-520 | Income Tax Assessment Act 1997 section 880-C

Reasons for decision: Summary: The requirements of paragraph 128B(3)(jb) of the ITAA 1936 are satisfied. The Fund is excluded from liability to withholding tax on interest, dividend and non-share dividend income derived in respect of assets derived from its Australian investment under paragraph 128B(3)(jb) of the ITAA 1936. | Detailed Reasoning - Detailed reasoning: Section 128B of the ITAA 1936 imposes liability to withholding tax on income derived by a non-resident that consists of dividend income (subsection 128B(1) of the ITAA 1936), interest income (subsection 128B(2) of the ITAA 1936) as well as other income prescribed in that section. Subsection 128B(3) of the ITAA 1936 notes that section 128B of the ITAA 1936 will not apply to prescribed categories of income. Relevantly, paragraph 128B(3)(jb) of the ITAA 1936 provides an exclusion from withholding tax on interest, dividends and non-share dividends paid by an Australian resident company derived by a superannuation fund for foreign residents (subject to the satisfaction of certain conditions). • For the exclusion to apply, the interest, dividend and/or non-share dividend income must be: • Derived by a superannuation fund for foreign residents (as defined in section 118-520 of the ITAA 1997); and • Exempt from income tax in the country in which the superannuation fund for foreign residents arise. Further, from 1 July 2019, the extra requirements in subsection 128B(3CA) of the ITAA 1936 must also be met. | Detailed Reasoning - The Fund is a non-resident: The Fund is not a resident of Australia for tax purposes. | Detailed Reasoning - The Fund is a superannuation fund for foreign residents: The term 'superannuation fund for foreign resident'' is defined in section 118-520 of the Income Tax Assessment Act 1997 (ITAA 1997) as follows: | Detailed Reasoning - 118-520 Meaning of superannuation fund for foreign residents: (1) A fund is a superannuation fund for foreign residents at a time if: (a) at that time, it is: (i) an indefinitely continuing fund; and (ii) (ii) a provident, benefit, superannuation or retirement fund; and (b) it was established in a foreign country; and (c) it was established, and is maintained at that time, only to provide benefits for individuals who are not Australian residents; and (d) at that time, its central management and control is carried on outside Australia by entities none of whom is an Australian resident. (2) However, a fund is not a superannuation fund for foreign residents if: (a) an amount paid to the fund or set aside for the fund has been or can be deducted under this Act; or (b) a *tax offset has been allowed or is allowable for such an amount. Based on the facts it is considered that the Fund meets the requirements of being a superannuation fund for foreign residents as defined by section 118-520 of the ITAA 1997. | Detailed Reasoning - The income is derived by the Fund: Subsection 128B(3CA) of the ITAA 1936, along with paragraph 128B(3)(jb) of the ITAA 1936 requires the superannuation fund for foreign residents derive the income that consists of interest, dividends or non-share dividends paid by Australian resident companies. The fund retains the beneficial interest in the investments in Australia and has derived the unfranked dividends from those investments for the purposes of subsection 128B(3CA) of the ITAA 1936 and paragraph 128B(3)(jb) of the ITAA 1936. Therefore, the Fund will satisfy this requirement. | Detailed Reasoning - The Fund is exempt from income tax in the country in which the non-resident resides: In the circumstances, the Commissioner is satisfied that the Fund 'resides' in a foreign country for the purposes of subparagraph 128B(3)(jb)(iii) of the ITAA 1936. Amongst other factors, the fact that the Fund is governed by that country's law makes it clear that it has its seat in and has legal capacity in the foreign country. Therefore, the Fund will satisfy this requirement. | Detailed Reasoning - Otherwise non-assessable non-exempt: The income derived by the Fund will not be non-assessable non-exempt income because of Subdivision 880-C of the ITAA 1997 or Division 880 of the Income Tax (Transitional Provisions) Act 1997 . Income derived by the Fund would not be otherwise treated as not assessable and not exempt by virtue of the above provisions. Accordingly, the above exclusion should not apply to exclude the Fund from entitlement to the withholding tax exemption for superannuation funds for foreign residents. | Detailed Reasoning - Subsection 128B(3CA) of the ITAA 1936: The Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Act 2019 introduced extra requirements that must be met for paragraph 128B(3)(jb) of the ITAA 1936 to apply. Generally, these extra requirements apply to income derived from 1 July 2019. Relevantly: • The Fund must satisfy the 'portfolio interest test' in relation to the test entity (subsection 128B(3CC) • The Fund must satisfy the 'influence test' (subsection 128B(3CD) in relation to the test entity, and • The income cannot otherwise be non-assessable non-exempt income of the Fund because of: ­ Subdivision 880-C of the ITAA 1997, or ­ Division 880 of the Income Tax (Transitional Provisions) Act 1997 . | Detailed Reasoning - The Fund satisfies the 'portfolio interest test': Subsection 128B(3CC) of the ITAA 1936 states: A superannuation fund satisfies the portfolio interest test in this subsection in relation to the test entity at a time if, at that time, the total participation interest (within the meaning of the Income Tax Assessment Act 1997) the superannuation fund holds in the test entity: (a) is less than 10%; and (b) would be less than 10% if, in working out the direct participation interest (within the meaning of that Act) that any entity holds in a company: (i) an equity holder were treated as a shareholder; and (ii) the total amount contributed to the company in respect of non-share equity interests were included in the total paid-up share capital of the company. As per the facts, the Fund does not hold more than 10% ownership of any of Australian investments. Furthermore, the Fund's Australian Investments also meet certain 'Equity Characteristics' as listed. In these circumstances, the Commissioner is satisfied that the total participation interest the Fund holds in the test entities: • Is less than 10% pursuant to paragraph 128B(3CC)(a) at all relevant times; and • Would be less than 10% in the circumstances detailed in paragraph 128B(3CC)(b) at all relevant times. The Fund therefore satisfies the 'portfolio interest test' in respect of its Australian investments. | Detailed Reasoning - The Fund satisfies the 'influence test': Subsection 128(3CD) of the ITAA 1936 states: A superannuation fund has influence of a kind described in this subsection in relation to the test entity at a time if any of the following requirements are satisfied at that time: (a) the superannuation fund: (i) is directly or indirectly able to determine; or (ii) in acting in concert with others, is directly or indirectly able to determine; the identity of at least one of the persons who, individually or together with others, make (or might reasonably be expected to make) the decisions that comprise the control and direction of the test entity's operations; (b) at least one of those persons is accustomed or obliged to act, or might reasonably be expected to act, in accordance with the directions, instructions or wishes of the superannuation fund (whether those directions, instructions or wishes are expressed directly or indirectly, or through the superannuation fund acting in concert with others). As such, there are two distinct sub-tests within the influence test. Sub-test 1 of the influence test, as contained in paragraph 128B(3CD)(a), assesses whether the Fund is able to determine the identity of at least one of the persons who, individually or together with others, makes or is reasonably expected to make, decisions comprising the control and direction of the test entity's operations. This includes situations where The Fund is able to act in concert with others to determine the identity of a relevant decision-maker in the test entity. Sub-test 1 also extends to situations where the Fund, in its own right, holds the ability to approve or veto decisions which go to the control or direction of the test entity. Sub-test 2 of the influence test, as contained in paragraph 128B(3CD)(b), assesses whether at least one of the relevant decision-making persons of the test entity is accustomed or obliged to act, or might reasonably be expected to act, in accordance with the directions, instructions or wishes of the Fund. Relevantly, in respect of the investments listed in the relevant facts of this ruling: • Neither the Fund, nor any related party, is involved in the day to day management of the business of any of the Australian companies or trusts; • Neither the Fund, nor any related party, has the right to appoint a director to the Board of Directors of the Australian company, Australian debt issuer or equivalent role in a trust; • Neither the Fund, nor any related party, holds the right to representation on any investor representative or advisory committee (or similar) of the Australian companies or trusts; • Neither the Fund, nor any related party, has the ability to direct or influence the operation of the Australian companies or trusts outside of the ordinary rights conferred by the equity interest held; • The Fund only holds rights to vote in proportion to its equity interest in each Australian company or trust. Accordingly, the Fund does not have influence of a kind described in subsection 128(3CD) of the ITAA 1936 in respect of these equity investments. The Fund does not have capacity to influence (either directly or indirectly) the day to day management of the operations of their equity investments. Consequently, the Commissioner accepts that the Fund does not have influence of a kind described in subsection 128B(3CD) of the ITAA 1936. | Detailed Reasoning - Otherwise non-assessable non-exempt: Section 128D of the ITAA 1936 provides the following: Income other than income to which section 128B applies by virtue of subsection (2A), (2C) or (9C) of that section upon which withholding tax is payable, or upon which withholding tax would, but for paragraph 128B(3)(ga), (jb) or (m), section 128F, section 128FA or section 128GB, be payable, is not assessable income and is not exempt income of a person. Income derived by the Fund would not be otherwise treated as not assessable and not exempt income by virtue of the above provisions. Accordingly, the above exclusion should not apply to exclude the Fund from entitlement to the withholding tax exemption for superannuation funds for foreign residents. | Detailed Reasoning - Conclusion: The Fund is excluded from withholding tax in relation to interest, dividend and non-share dividend income derived from its current investments in Australia in accordance with paragraph 128B(3)(jb) of the ITAA 1936.

Statements from the managers of the Fund have been provided with the ruling application indicating that: • The Fund is an indefinitely continuing fund; | • The Fund was established in a country other than Australia; | • The Fund was established and maintained only to provide benefits for individuals who are not Australian residents; | • No amount paid to the Fund can be deducted under the ITAA 1997 or the ITAA 1936; | • The income of the Fund is not non-assessable non-exempt income of the Fund because of either: | • Formal certification from the tax authority of the foreign country was supplied with this ruling confirming that the Fund is generally exempt from tax in its home country . | The Fund holds a beneficial interest in investments in common stock in Australia and derives interest, dividends and non-share dividends from these investments. | All investments in Australia are listed on the ASX with a total participation interest in respect of each investment being below 10%. | The Fund holds no rights to appoint a person to a board, committee or similar, either directly or indirectly. | The Fund has not entered into, or received, any side letters, arrangements or agreements. | The Fund holds no veto rights on security holder votes. | The Fund does not have influence of a kind described in subsection 128(3CD) of the ITAA 1936 in respect of these equity investments. The Fund does not have capacity to influence (either directly or indirectly) the day to day management of the operations of its investments. | Does IVA apply to this private ruling?: Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement. | If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website ato.gov.au/gaar.