Private ruling: Exemption from Income tax/Withholding tax
Published: July 2011
Ruling period: Financial year ended 30 June 2010 | Financial year ended 30 June 2011 | Financial year ending 30 June 2012 | Financial year ending 30 June 2013 | Financial year ending 30 June 2014
Date scheme commenced: 1 July 2009

Ruling: Q1: 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)? | A1:  | Q2: 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? | A2: 

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 ITAA 1997 and a tax offset has not been allowed or is not allowable for such an amount.. A letter from the tax authorities of the country of residence of the fund certifying that the fund is a trust forming part of a pension, profit sharing or stock bonus plan which is exempt from taxation and is a resident of that country for the purposes of taxation. Copies of financial statements for the 2009 and 2010 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 118-520 | 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 Income Tax Assessment Act 1997 (ITAA 1997) as follows: 118-520(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. 118-520(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. Perusal of the rules of the fund indicates that the fund satisfies the definition of a superannuation fund for foreign residents for the purposes of section 118-520 of the ITAA 1997. The statement by the trustee of the fund also confirms that the requirements of the definition have been met. The tax authorities in the country of residence of the fund have certified that the fund is a pension fund which is exempt from taxation and is a resident of that country for the purposes of taxation. Accordingly the interest and/or dividend income of the fund is excluded from withholding tax pursuant to paragraph 128B(3)(jb) of the ITAA 1936. Section 128D of the ITAA 1936 provides that interest and dividend income that is excluded from withholding tax pursuant to paragraph 128B(3)(jb) is not assessable income.

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