Private ruling: Exemption from Australian withholding tax
Date of advice: 19 May 2016
Published: June 2016
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020
Date scheme commenced: 1 July 2015

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: Yes. | 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: Yes.

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 2014 and 2015 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. The trust deed and fund rules indicate that the fund has been established to provide pension and superannuation benefits for the members. On the basis of the information provided, it is considered that the fund is a superannuation fund for foreign residents as defined in section 118-520 of the ITAA 1997. The statement from 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 entity is a registered pension fund and is exempt from income tax in respect of income from investments and deposits in that country. 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.