Private ruling: Foreign superannuation funds
Published: September 2013
Ruling period: Year ending 30 June 2011 | Year ending 30 June 2012 | Year ending 30 June 2013
Date scheme commenced: 1 July 2010

Ruling: Questions and answers | 1. Is the trustee of the overseas based superannuation fund excluded from liability to withholding tax on its interest and/or dividend income derived from Australia under paragraph 128B(3)(jb) of the Income Tax Assessment Act 1936 (ITAA 1936)? | No. | 2. Is interest and/or dividend income derived by the trustee of the overseas based superannuation fund non-assessable income of the fund under section 128D of the ITAA 1936? | No.

Relevant facts and circumstances: The applicant has applied for a private ruling for the superannuation fund for foreign residents. The application includes the following documentation: · A copy of a statement from the trustee of the overseas based superannuation fund (the fund), confirming that the fund is an indefinitely continuing fund and a provident, benefit, superannuation or retirement fund, was established in a foreign country, was established and is maintained only to provide benefits for individuals who are not Australian residents, the central management and control of the fund is carried on outside Australia by entities none of whom is an Australian resident, an amount paid to the fund or set aside for the fund has not been or cannot be deducted under the Income Tax Assessment Act 1997 (ITAA 1997) and a tax offset has not been allowed or is not allowable for such an amount. · Letter from the tax authorities in the country of residence of the fund, certifying that the fund is a registered pension fund and is exempt from tax in respect of income from investments and deposits in that country. · Copies of the financial statements for the 2010 and 2011 years. · A copy of the fund document which provides details of rules and benefits available to the members.

Relevant legislative provisions: Income Tax Assessment Act 1936 Paragraph 128B(3)(jb). | Income Tax Assessment Act 1936 Section 128D. | Income Tax Assessment Act 1997 Section 118-520.

Reasons for decision: Summary: Paragraph 128B(3)(jb) of the ITAA 1936 excludes interest and dividend income from withholding tax where that income: (i) is derived by a non-resident that is a superannuation fund for foreign residents; and (ii) consists of interest, or consists of dividends or non-share dividends paid by a company that is a resident; and (iii) is exempt from income tax in the country in which the non-resident resides; For the financial years ended 30 June 2008 and onwards, the term 'superannuation fund for foreign residents' is defined in section 118-520 of the ITAA 1997 as follows: (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) a provident, benefit, superannuation fund 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. In reviewing your private ruling request and the information that you have provided you have satisfied the conditions outlined under section 128D of the ITAA 1997 and paragraph 128B(3)(jb) of the ITAA 1936. However you not satisfied all of the conditions outlined under section 118-520 of the ITAA 1997. Subsection 118-520(1)(c) of the ITAA 1997 provides that the fund must have been established, and is maintained at that time, only to provide benefits for individuals who are not Australian residents. In your private ruling request you have stated that pension benefits may be paid out to residents of Australia or a Territory of the Commonwealth. Therefore as you do not satisfy all the conditions outlined under section 118-520 of the ITAA 1997, you will not be excluded from liability to withholding tax on interest and/or dividend income derived from Australia under paragraph 128B(3)(jb) of the ITAA 1936. Further any interest and/or dividend income derived from Australia by the trustee will be assessable income of the fund under section 128D of the ITAA 1936. You have stated in your private ruling that it was your understanding that pursuant to section 6(7A) of the Income Tax Assessment Act 1936 that, a fund will not lose it's foreign status as a foreign superannuation fund merely because pensions are paid out to residents of Australia or a Territory of the Commonwealth. However post 2006 this law was repealed and therefore has no application. Subsequent to its repeal it was replaced with; Subsection 118-520(1)(c) of the ITAA 1997 it was established, and is maintained at that time, only to provide benefits for individuals who are not Australian residents;