Private ruling: Foreign Super Fund
Published: January 2014
Ruling period: 1 July 2012 to 30 June 2017.
Date scheme commenced: 1 July 2012.

Ruling: Q2: Is interest and/or dividend income derived from Australia by the trustee of the foreign super fund on behalf of its participating funds not assessable and not exempt income under section 128D of the ITAA 1936? Yes.

Relevant facts and circumstances: The applicant has applied for a private ruling for a superannuation fund for foreign residents. The superannuation fund concerned is a foreign super fund established by law in another country. The superannuation fund is created and organised in another country and is maintained at all times as a domestic trust in the other country. The superannuation fund is established, operated and maintained exclusively for the management, investment and reinvestment of moneys or property of its participating funds. The superannuation fund and its participating funds are all exempt from income tax in the country of residence. Each of the participating funds, are established by law in the country of residence. That law specifies the operating rules of each of the participating funds, including rules about membership and benefits. The application includes the following documentation and/or electronic web links: · A list of the participating funds of the superannuation fund. · A letter from the relevant overseas taxation authority certifying that the superannuation fund and its participating funds are exempt from income tax in their country of residence. · A copy of the relevant operating trust agreement and an electronic link to the governing legislation. · A copy of a members benefit guide · A statement from the superannuation fund advising that at the time of making the statement: o the superannuation fund and each of its participating funds are indefinitely continuing funds and are provident, benefit, superannuation or retirement funds, o the superannuation fund and each of its participating funds were established in a foreign country, o the superannuation fund and each of its participating funds were established, and are maintained, only to provide benefits for individuals who are not Australian residents o the central management and control of the superannuation fund and its participating funds are carried on outside Australia by entities none of whom is an Australian resident, o an amount paid to or set aside for the superannuation fund or its participating funds has not been or cannot be deducted under the ITAA 1997, and o a tax offset has not been allowed or is not allowable for such an amount. · A copy of the superannuation fund's most recently completed annual financial report . · Electronic links to the financial statements of the participating funds.

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: Section 128D of the Income Tax Assessment Act 1936 (ITAA 1936) provides that interest and dividend income that is excluded from withholding tax pursuant to paragraph 128B(3)(jb) of the ITAA 1936 is not assessable income. For the financial years ended 30 June 2008 and onwards, 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. 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 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; (b) a tax offset has been allowed or is allowable for such an amount Perusal of the operating trust agreement and the relevant legislation governing the operating rules of the superannuation fund and its participating funds indicates that the superannuation fund and its participating funds satisfy the definition of a superannuation fund for foreign residents for the purposes of section 118-520 of the ITAA 1997. The statement by the superannuation fund board also confirms that the requirements of this definition are met. Accordingly, the interest and/or dividend income of the superannuation fund and its participating funds is excluded from withholding tax and is not assessable income.

Is the trustee of the foreign super fund and its participating funds excluded from liability to withholding tax on its interest and/or dividend income derived from Australia on behalf of the participating funds under paragraph 128B(3)(jb) of the ITAA 1936?