Private ruling: Foreign superannuation fund - withholding tax exemption
Date of advice: 12 May 2026
Published: 17 August 2026
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the Fund excluded from liability to withholding tax on its interest, dividend and non-share dividend income derived from its Australian investments acquired on or before 27 March 2018 under paragraph 128B(3)(jb) of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: Yes. | Q2: Is the Fund excluded from liability to withholding tax on its interest, dividend and non-share dividend income derived from its Australian investments acquired after 27 March 2018 under paragraph 128B(3)(jb) of the ITAA 1936? | A2: Yes.

Relevant facts and circumstances: Background 1. The Fund administers statutory pension schemes established under law for various categories of individuals in Country A (a foreign country). 2. These pension schemes are governed by a unified legal framework and are centrally managed in accordance with the relevant laws which established the Fund, as well with its subsequent amendments and regulations. Purpose of the Fund 3. The Fund was established to implement the relevant law to provide pension to eligible employees. 4. The purpose of the Fund is to provide: a. Old-age, disability, sickness and death insurance of eligible employees, b. Old-age, disability, sickness and death of self-employed workers, and c. Work injury insurance. Membership 5. A member of the Fund is required to be a citizen of Country A. Broadly, every citizen who works for an eligible employer are eligible to be members of the Fund. Contributions 6. The Fund is funded through mandatory statutory contributions from the following sources: a. Employee contributions via compulsory deductions from salary, b. Employer contributions via mandatory employer contributions made on behalf of employees, and c. Contributions from the Treasury of Country A. 7. Funds managed by the Fund are segregated and dedicated solely to social security and pension purposes. Pension contributions and associated assets are separately accounted for and are not mixed with other government funds or allocations for non-pension or non-social security uses. 8. All investments of the Fund are consolidated into one fund; however, the funds are separated from other benefits of the Fund. 9. Funds attributable to retirement benefits are not commingled with those used for pre-retirement social security benefits. Contributions are allocated at source to their respective statutory purposes, and the Fund maintains separate accounting records and actuarial tracking for retirement and non-retirement obligations. 10. Investments are managed and monitored at the portfolio/fund level, ensuring that assets supporting pension liabilities are clearly identifiable. Any investment returns derived from assets attributable to other benefits in the fund (including Australian investments) are separately identifiable and accounted for. 11. There is no statutory framework which allows the Fund or Country A any discretionary or unilateral right to access or repurpose any funds designated for pension benefits towards any general social spending. Benefits provided by the Fund 12. Broadly, the Fund provides benefits to members as follows: a. Retirement Pension: Payment of a retirement pension of the insured person. b. Sickness Pension: Payment of a retirement pension in the case of sickness or disability of the insured person. c. Retirement allowance: Financial allowance, payable by instalments at the end of service but without being entitled to a retirement pension. d. Death gratuity: Payable in the event of the insured or pensioner's death. e. Family Pension: In the event of the insured person's death, the entitlement of a pension shall be distributed among the beneficiaries of the family who satisfy certain conditions. f. Commutation: When the individual has secured a period qualifying for entitlement of a pension, they may commute a part of the retirement pension in the form of a lump sun amount. The Fund's Australian investments 13. The Fund has invested in Australian equity investments. These equity investments have the following characteristics: a. The equity investments are listed on the ASX. b. The Fund holds less than 10% of the total equity interests on issue of the Australian companies in which it invests. c. The Fund has no involvement in the day-to-day management of the business of the Australian companies. d. The Fund has no right to appoint a director to the Board of Directors of the Australian companies. e. The Fund has no right to representation on any investor representative or advisory committee (or similar) of the Australian companies. f. The Fund has no ability to direct or influence the operation of the Australian companies outside of the ordinary rights conferred by the equity interests held. 14. The Fund does not have the ability to direct or influence the operation of the company or otherwise provide the Fund with anything that would constitute influence under subsection 128B(3CD) of the ITAA 1936.

Relevant legislative provisions: Income Tax Assessment Act 1936 paragraph 128B(3)(jb) | Income Tax Assessment Act 1936 paragraph 128B(3CA) | Income Tax Assessment Act 1936 paragraph 128B(3CC) | Income Tax Assessment Act 1936 paragraph 128B(3CD) | Income Tax Assessment Act 1997 section 118-520

Reasons for decision: Summary: Question 1 The Fund is excluded from liability to withholding tax on its interest, dividend and non-share dividend income derived in respect of its Australian investments acquired on or before 27 March 2018 under paragraph 128B(3)(jb) of the ITAA 1936. | Detailed Reasoning - Detailed reasoning: Broadly, paragraph 128B(3)(jb) of the ITAA 1936 provides an exclusion from withholding tax for interest, dividends and non-share dividends 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: 1. derived by a superannuation fund for foreign residents (as defined in section 118-520 of the ITAA 1997), and 2. 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. Each of these requirements is considered as set out below. | Detailed Reasoning - The Fund is a non-resident: The Commissioner has determined from the facts and circumstances that the Fund is not a resident of Australia. Therefore, the Fund satisfies this requirement. | Detailed Reasoning - The Fund is a superannuation fund for foreign residents: The term 'superannuation fund for foreign residents' is defined in section 118-520 of the ITAA 1997 which provides: 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 i. An indefinitely continuing fund The term 'indefinitely continuous fund' is not defined in either the ITAA 1997 or the ITAA 1936. Therefore, it should be given its ordinary meaning subject to the context in which it appears and having regard to any relevant case law authorities. The Australian Oxford Dictionary, 2004, Oxford University Press, Melbourne defines the term 'fund' as; 1: a permanent stock of something ready to be drawn upon... 2: a stock of money, especially one set apart for a purpose. In Scott v. FC of T (No 2) (1966) 14 ATD 333; (1966) 10 AITR 290 (Scott), Windeyer J expressed the view that 'fund' in the context of 'superannuation fund' ordinarily meant 'money (or investments) set aside and invested, the surplus income therefrom being capitalised'. Windeyer J's views in Scott were cited with approval by Hill J in Walstern Pty Ltd v. Commissioner of Taxation (2003) 138 FCR 1; 2003 ATC 5076; (2003) 54 ATR 423 who stated that 'for present purposes, the point is the need for "money" or "other property" to constitute a fund'. In this case, the Fund is financed by the contributions made by the employer, the employee and via the contributions made from the Treasury of Country A as well as income earned from the investment of the Fund's monies. As such, the Fund meets the requirements of being a 'fund'. The Fund was created by statute which does not fix a termination date. There is no indication that there is an intention for the Fund to end at a definite point in time. Therefore, it is accepted that the Fund will continue to operate for an indefinite period. Further, the Fund provided a letter to the Commissioner that states the Fund is an indefinitely continuing fund. Therefore, the Fund satisfies this requirement. ii. A provident, benefit, superannuation or retirement fund The phrase 'provident, benefit, superannuation or retirement fund' under subparagraph 118-520(1)(a)(ii) of the ITAA 1997 is not defined in either the ITAA 1997 or the ITAA 1936. ATO Interpretative Decision ATO ID 2009/67 Income Tax: Superannuation fund for foreign residents (ATO ID 2009/67) refers to these authorities to provide guidance on the meaning of the phrase 'provident, benefit, superannuation or retirement fund': None of the four descriptors 'provident', 'benefit', 'superannuation' or 'retirement fund' in subparagraph (a)(ii) of the definition of 'superannuation fund for foreign residents' in section 118-520 of the ITAA 1997 are defined. The terms have, however, been the subject of judicial consideration. The courts have held that for a fund to be a 'provident, benefit, superannuation or retirement fund', the fund 's sole purpose must be to provide superannuation benefits, that is, benefits to a member upon the member reaching a prescribed age or upon their retirement, death or other cessation of employment ( Scott v. FC of T (No 2) (1966) 14 ATD 333; (1966) 10 AITR 290, per Windeyer J; Mahony v. FC of T (1967) 14 ATD 519, per Kitto J; Walstern Pty Ltd v. Commissioner of Taxation (2003) 138 FCR 1; 2003 ATC 5076; (2003) 54 ATR 423, per Hill J and Cameron Brae Pty Ltd v. Federal Commissioner of Taxation (2007) 161 FCR 468; 2007 ATC 4936; (2007) 67 ATR 178, per Stone and Allsop JJ). The above extract establishes that for a fund to qualify as a provident, benefit, superannuation or retirement fund, it must have the sole purpose of providing retirement benefits or benefits in other allowable contemplated contingencies (such as death, disability or serious illness). In this case, the primary objective of the Fund is to provide for the Fund members' pension on their retirement or for their families on death before or after retirement. The benefits provided by the Fund are a retirement pension, disability pension, survivor's benefits, end-of-service benefits or pension for specific cases. Furthermore, the Fund does not provide benefits as a result of events other than old age retirement, disability or death. The Commissioner accepts these benefits align with the sole purpose of providing retirement benefits or benefits in other allowable contemplated contingencies. Therefore, the Fund satisfies this requirement. iii. Established in a foreign country The Fund was established by statute in Company A. Therefore, the Fund satisfies this requirement. iv. Was established and maintained only to provide benefits for individuals who are not Australian residents The Fund was established in accordance with the Decree to provide sustainable insurance and social services to employees in both the public and private sectors to support the citizens of Country A. Further, the Fund provided a statement representing that the Fund was established, and is maintained, only to provide benefits for individuals who are not Australian residents. Therefore, the Fund will satisfy this requirement. v. Central management and control (CM&C) Paragraphs 20 and 21 of Taxation Ruling TR 2008/9 Income tax: meaning of 'Australian superannuation fund' in subsection 295-95(2) of the Income Tax Assessment Act 1997 (TR 2008/9) states: 20. The CM&C of a superannuation fund involves a focus on the who, when and where of the strategic and high level decision making processes and activities of the fund. In the context of the operations of a superannuation fund, the strategic and high level decision making processes includes: • formulating the investment strategy for the fund; • reviewing and updating or varying the fund's investment strategy as well as monitoring and reviewing the performance of the fund's investments; • if the fund has reserves - the formulation of a strategy for their prudential management; and • determining how the assets of the fund are to be used to fund member benefits. 21. The other principal areas of operation of a superannuation fund that form part of the day-to-day or operational side of the fund's activities will not constitute CM&C. These activities do not form part of the CM&C of the fund because they are not of a strategic or high level nature. Rather, these activities are of a more formalistic or administrative nature. Examples of such activities include the acceptance of contributions that are made on a regular basis, the actual investment of the fund's assets, the fulfilment of administrative duties and the preservation, payment and portability of benefits. The Fund was incorporated and established by statute and is wholly owned and controlled by the government of Country A and is a resident of Country A for tax purposes. Therefore, the Fund satisfies this requirement. vi. Subsection 118-520(2) 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 the Act; or b) a tax offset has been allowed or is allowable for such an amount The Fund has not and cannot deduct amounts under either the ITAA 1997 or the ITAA 1936 for amounts paid to it. The Fund has not been allowed a tax offset or a tax offset is not allowable for an amount that has been paid to it. Consequently, based on the statement provided by the applicant, this requirement is satisfied. vii. Conclusion As all of the above requirements are satisfied, 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 - Subsection 128B(3CA) of the ITAA 1936: Subsection 128B(3CA) of the ITAA 1936, along with paragraph 128B(3)(jb) of the ITAA 1936 requires the superannuation fund for foreign residents to derive the interest, dividends or non-share dividends paid by Australian resident companies. The Fund invests directly into Australia and receives interest, dividend or non-share dividend income directly from its Australian investments. It will, therefore, derive the relevant income for the purposes of subsection 128B(3CA) of the ITAA 1936 and paragraph 128B(3)(jb) of the ITAA 1936. | Detailed Reasoning - The Fund is exempt from income tax in the country in which the non-resident resides: The Fund is exempt from income tax on its interest and dividend income in its country of residence. Therefore, the Fund satisfies this requirement. | Detailed Reasoning - Otherwise non-assessable non-exempt: The income received 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 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: As all the requirements of paragraph 128B(3)(jb) of the ITAA 1936 are satisfied, the Fund will be entitled to an exemption from withholding tax on interest, dividend and non-share dividend income derived in respect of assets acquired on or before 27 March 2018 under paragraph 128B(3)(jb) of the ITAA 1936. Question 2 | Summary: The Fund is excluded from liability to withholding tax on its interest, dividend and non-share dividend income derived from its Australian investments acquired after 27 March 2018 under paragraph 128B(3)(jb) of the ITAA 1936. | Detailed Reasoning - Detailed reasoning: 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 from 1 July 2019 onwards. These extra requirements apply only to assets which were acquired after 27 March 2018. For the purposes of Question 2, which only considers the Fund's assets acquired after 27 March 2018, these extra requirements are applicable. Relevantly: i. The fund must satisfy the 'portfolio interest test' in relation to the test entity (subsection 128B(3CC) ii. The fund must satisfy the 'influence test' (subsection 128B(3CD) in relation to the test entity, and iii. The income cannot otherwise be non-assessable non-exempt income of the Fund because of: a. Subdivision 880-C of the ITAA 1997, or b. Division 880 of the Income Tax (Transitional Provisions) Act 1997 . It has been established in Question 1 above that the Fund has satisfied all the pre-existing conditions of paragraph 128B(3)(jb) of the ITAA 1936. As such, the below analysis concentrates only on the extra requirements outlined above. | 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. The Fund holds less than 10% of the total participation interests in each Australian company or trust it currently invests in. Further, it would hold less 10% of the total participation interests in each Australian company or trust in the circumstances detailed in paragraph 128B(3CC)(b) of the ITAA 1936. The Fund therefore satisfies the 'portfolio interest test' in respect of its current investments. | Detailed Reasoning - The Fund satisfies the 'influence test': Subsection 128B(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) of the ITAA 1936, 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) of the ITAA 1936, 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 Australian investments listed in the relevant facts and circumstances to this Ruling: a. Neither the Fund, nor any related party, has involvement in the day to day management of the business of any of the Australian companies or trusts. b. Neither the Fund, nor any related party, has the right to appoint a director to the Board of Directors of the Australian company or equivalent role in a trust. c. Neither the Fund, nor any related party, holds the right to representation on any investor representative or advisory committee (or similar) of the Australian company or equivalent role in a trust. d. Neither the Fund, nor any related party, has the ability to direct or influence the operation of the Australian company, or trust outside of the ordinary rights conferred by the equity interest held. e. 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 128B(3CD) of the ITAA 1936 in respect of its Australian investments. the Fund does not have capacity to influence (either directly or indirectly) the day-to-day management of the operations of their 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 - The income cannot otherwise be non-assessable non-exempt income of the Fund: The income received 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 . The Fund therefore satisfy this condition in respect of its current investments. | Detailed Reasoning - Conclusion: The Fund is excluded from liability to withholding tax on its interest, dividend and non-share dividend income derived in respect of its Australian investments acquired after 27 March 2018.