Private ruling: Withholding taxes
Date of advice: 8 February 2019
Published: May 2019
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is Entity A as trustee of the Fund exempt from liability to withholding tax on interest, dividend and non-share dividend income derived from its investments into Australia under paragraph 128B(3)(jb) of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: Yes, only in relation to those investments described in Fact 15. | Q2: Is interest, dividend and non-share dividend income derived by Entity A as trustee of the Fund on its investments into Australia not assessable and not exempt income of the Fund under section 128D of the ITAA 1936? | A2: Yes, only in relation to those investments described in Fact 15. | Q3: Is the Fund a ‘foreign superannuation fund’ for the purposes of subsection 275-20(4) of the ITAA 1997? | A3: Yes. | Q4: Are wholly owned subsidiaries of the Fund covered under paragraph 275-20(4)(k) of the ITAA 1997? | A4: Yes. This ruling for questions 1 and 2 applies for the following periods: Year ended 30 June 20XX Year ended 30 June 20XX This ruling for questions 3 and 4 applies for the following periods: Year ended 30 June 20XX Year ended 30 June 20XX Year ended 30 June 20XX Year ended 30 June 20XX Year ended 30 June 20XX

Relevant facts and circumstances: Background 1. The Pension Plan is a defined benefit pension plan for employees of X. It has hundreds of thousands of members. 2. The Pension Plan and Fund were established outside Australia and governed by statute and the Primary Pension Plan rules. 3. Entity A is the administrator of the Pension Plan and trustee of the Fund. Entity B is responsible for making decisions around plan design and contribution rates. 4. The cash, investments, other assets, liabilities and reserves of Entity A constitute the Fund. Entity A is trustee of the Fund. 5. The Fund is constituted for the sole purpose of paying pension benefits in respect of members in accordance with the Pension Plan. 6. The contributions of the employers and members, the income from investments plus profits less losses on the sale of investments, and any other credits of the Entity A in connection with the Pension Plan are deposited in the Fund. 7. The benefits payable under the Pension Plan, the expenses of Entity A that constitute the fees and expenses of administering the Pension Plan, and the costs of Entity B attributable to the Pension Plan are paid out of the Fund. 8. Entity A invests the Fund . Entity A and Entity B 9. Entities A and B are corporations established without share capital. 10. Entity A provides strategic, risk and operational management in serving Pension Plan members and employers, collecting contributions and paying pensions, and investing the Pension Plan funds. 11. Entity B is responsible for decision making with regard to designing affordable pension benefits, setting contribution levels, and determining the composition of its own board and Entity A’s board of directors. 12. The statutory objects of Entity A are to act as administrator of the Pension Plan and trustee of the Fund, to advise and assist Entity B and to exercise such other powers and perform such other duties as required under its governing document. 13. The duties performed by Entity A include administering the Pension Plan, paying pensions, establishing investment policies, allocating the assets of the Pension Plan, providing for the actuarial valuation of the Pension Plan, and providing reasonable technical and administrative support for Entity B. 14. Entity A has offices in multiple global cities. However, all significant management and investment decisions are undertaken by Entity A’s board of directors located outside of Australia. Investments in Australia 15. Entity A invests the Fund directly into Australian investments and owns a number of Australian assets in its own name. The first entry point into Australia is directly owned by the Entity A as trustee of the Fund, and there are no interposed non-resident entities in the investment structure. These investments are covered by questions 1 and 2 of this private ruling. 16. Entity A invests the Fund into Australian managed investment trusts. Entity A’s wholly owned subsidiaries 17. Entity A may incorporate, or cause to be incorporated, subsidiary companies for the purpose of achieving its objectives. These subsidiaries are wholly owned by the Fund. 18. Entity A, when investing the Fund, makes some investments indirectly into Australia via its wholly owned subsidiaries. For the avoidance of doubt, questions 1 and 2 of this ruling do not apply to these investments. 19. Entity A’s wholly owned subsidiaries may invest in Australian managed investment trusts. Description of the Pension Plan Membership 20. A member of the Pension Plan includes employees who undertake full time continuous employment with an eligible employer as listed in the Pension Plan rules. Members remain part of the Pension Plan until either terminating their membership or death. Contributions 21. Employees and employers contribute to the Pension Plan. The contributions to be paid depend on an employee’s salary and the contribution rate for the year as set out in the governing regulations. 22. Once an employee reaches 71 years of age, they must start their pension and can no longer make contributions. 23. If a person leaves their previous employer and joins an eligible employer, thereby becoming a Pension Plan member, they may be able to transfer the commuted value of pension benefits accumulated under the previous employer’s pension plan to the Pension Plan and receive credited service. Benefits 24. The normal retirement age for members of the Pension Plan is 65 years of age. Some classes of members have a retirement age of 60 years of age. Members who cease employment within 10 years of their normal retirement age may start an early retirement pension. 25. If a Pension Plan member is no longer employed by an eligible employer, they may choose from a number of options depending on their age and years of credited service. The following are potential benefits available to retirees; ● A commuted value benefit ● Retirement pension ● Early retirement pension ● Bridge benefit ● A transfer of the commuted value of the pension ● A transfer of their service to a new employer’s pension plan if the new employer has an agreement in place with the Pension Plan. 26. Other potential benefits receivable include ● Disability waiver benefits ● Disability pension ● A death benefit to be paid to the surviving spouse, dependent child, designated beneficiary or the estate of the member. ● A survivor benefit to an eligible spouse and/or the member’s eligible dependent children consisting of either a survivor pension and/or a lump sum payment. Cash refund of the Commuted Value Benefit 27. A member’s pension is immediately locked in on joining the Pension Plan. A member immediately begins to earn a pension and is entitled to a benefit. 28. A cash refund of the commuted value of a member’s pension may be available in exceptional circumstances. These circumstances include: ● when the annual pension to be paid is a very small amount, or ● if a member has a shortened life expectancy due to a medical condition of less than two years. 29. The commuted value is the estimated amount of money a member would have to set aside at a point in time, to grow with tax-sheltered investment earnings, to provide the member with a future benefit similar to what the member has earned under the Pension Plan. 30. On receiving a cash refund of the commuted value of the pension, a member is no longer entitled to any benefits under the Pension Plan. Retirement and bridge benefits 31. The benefit to be paid to a member is determined using a statutory formula and by reference to the number of years of credited service, salary, any amounts transferred into the Fund to the credit of the member from other retirement funds, and the age of retirement. Adjustments are made to these numbers based on certain criteria. 32. A retirement pension is paid to a member when a member retires and reaches the normal retirement age. 33. An early retirement pension may be paid to a member within 10 years of their normal retirement age. A member’s age and years of service determine whether the pension is an unreduced early retirement pension or a reduced early retirement pension. 34. Subject to the locking in provisions, a deferred benefit may also be paid where a member is paid either a retirement or early retirement pension. This is for members who were not entitled to a retirement pension at the time of their departure from an eligible employer. 35. A bridge benefit may be payable to members drawing their retirement or early retirement pension up until they reach 65 years of age. 36. On retirement a member receiving a pension will be entitled to a defined amount paid in monthly instalments for the rest of their life. Transfer value 37. A transfer value is the commuted value of pension benefits that would be payable in the future. A member can then have this amount transferred to another registered pension plan, a locked-in registered retirement savings vehicle, or to a financial institution to buy an annuity. A person opting for a transfer value ceases to be a member and is no longer entitled to any benefits under the Pension Plan. Transfer of service 38. When an employee leaves an eligible employer and commences employment with another employer, it may be possible to have the person’s years of credited service transferred to the person’s new employer’s pension plan. In this event, a person ceases to be a member of the Pension Plan and is no longer entitled to any benefits under the Pension Plan. The AVC 39. In addition to the defined benefit component, the Pension Plan also offers an additional voluntary component (AVC) provision. AVCs are administered separately from the defined benefit component. 40. AVCs are an additional component to the Pension Plan for members that operate like an accumulation fund. Funds in an AVC account are invested by Entity A as part of the Fund and earn the Fund’s net rate of return. 41. Amounts in an AVC account may be either non-locked in or locked in amounts. Non-locked in amounts may be withdrawn as cash, or transferred to another registered pension plan or retirement vehicle. Non-locked in amounts withdrawn as cash are subject to local taxation provisions. Locked-in amounts may only be withdrawn in order to be transferred to other registered pension plans or retirement vehicles, or to purchase additional credit for the defined benefit component of the Pension Plan. 42. The AVC component is only available to members of the Pension Plan. On ceasing membership to the Pension Plan, all amounts in the AVC account must be either transferred or withdrawn. Other facts 43. As Entity A, the Fund, and the Pension Plan are all established and governed by statute and regulations, they cannot be discontinued unless the statute is repealed. 44. If the Fund is to be wound up, the net assets of the Fund net of properly incurred liabilities are used to meet the accrued benefit entitlements of members, former members, and any other persons entitled to a benefit under the Pension Plan before any other distribution is made. 45. The Fund is exempt from income tax in its resident country. 46. The Fund will receive interest income from Australian investments, along with dividend and non-share dividend income from companies who are residents of Australia for tax purposes.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1936 paragraph 128B(3)(jb) | Income Tax Assessment Act 1936 section 128D | Income Tax Assessment Act 1997 section 118-520 | Income Tax Assessment Act 1997 subsection 275-20(4) | Income Tax Assessment Act 1997 s ubsection 295-95(2) | Income Tax Assessment Act 1997 section 960-135 | Income Tax Assessment Act 1997 subsection 995-1(1) | Superannuation Industry (Supervision) Act 1993 section 10

Reasons for decision: Detailed Reasoning - Detailed reasoning: Section 128B of the ITAA 1936 imposes liability to withholding tax on income derived by a non-resident that consists of dividend income (subsection 128B(1) of the ITAA 1936), interest income (subsection 128B(2) of the ITAA 1936) as well as other income prescribed in that section. Subsection 128B(3) of the ITAA 1936 notes that section 128B of the ITAA 1936 will not apply to prescribed categories of income. Relevantly, paragraph 128B(3)(jb) of the ITAA 1936 states that withholding tax, under section 128B of the ITAA 1936, will not be imposed on: (jb) income that: (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 requirements for the exemption from withholding tax under paragraph 128B(3)(jb) of the ITAA 1936 will be discussed below. The Fund is a non-resident The Fund is not a resident of Australia for tax purposes. The Fund was established outside Australia, and its management is also based outside Australia. The Fund therefore satisfies this requirement. The Fund is a superannuation fund for foreign residents Superannuation fund for foreign residents is a defined term in the ITAA 1936. Subsection 6(1) of the ITAA 1936 states: superannuation fund for foreign residents has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997. Subsection 995-1(1) of the ITAA 1997 sets out the following: superannuation fund for foreign residents has the meaning given by section 118-520. Section 118-520 of the ITAA 1997 states the following: (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. (2) However, a fund is not a superannuation fund for foreign residents if: (a) an amount is 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. Consequently, for the Fund to be considered a superannuation fund for foreign residents for the purposes of paragraph 128B(3)(jb) of the ITAA 1936, it must be established that: ● The Fund is an indefinitely continuing fund ● The Fund is a provident, benefit, superannuation or retirement fund ● The Fund was established in a foreign country ● The Fund 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 of Australia by entities none of whom are Australian residents ● No amount paid to the Fund or set aside for the Fund has been or can be deducted under the ITAA 1997, and ● No tax offsets have been allowed or would be allowable for an amount paid to the Fund or set aside for the Fund. The Fund is an indefinitely continuing fund The legislation provides no guidance on the meaning of ‘indefinitely continuing’. It is not a technical legal expression, and the ordinary meanings of indefinitely and continuing involve little ambiguity or controversy. The Macquarie Dictionary , [Online], viewed on 1 February 2018, www.macquariedictionary.com.au defines ‘indefinitely’ and ‘continuing’ as follows: Indefinite: adjective 1. not definite; without fixed or specified limit; unlimited: an indefinite number 2. not clearly defined or determined; not precise. indefinitely, adverb Continue: verb ( Continued, continuing ) 1. to go forwards or onwards in any course or action; keep on. 2. to go on after suspension or interruption. 3. to last or endure. 4. to remain in a place; abide; stay. 5. to remain in a particular state or capacity The Fund, consisting of the assets of the Pension Plan, is governed by statute and the Pension Plan rules. Entity A, as administrator of the Pension Plan and trustee of the Fund is also created by statute. There is no indication that the Fund is to be wound up in the near future. Its actuary and annual reports have projections for the sustainability of the Fund to meet Pension Plan obligations for the foreseeable future. There is sufficient evidence to accept that the Pension Plan will continue to operate in accordance with the relevant governing statutes and Primary Pension Plan rules, and the Fund will continue indefinitely to meet the obligations to pay benefits under the Pension Plan rules. The Fund is a provident, benefit, superannuation or retirement fund In Scott v. FCT (No. 2) (1966) 40 ALJR 265; 14 ATD 333, Windeyer J stated (40 ALJR 265 at 278; 14 ATD 333 at 351): There is no definition in the Act of a superannuation fund. The meaning of the term must therefore depend upon ordinary usage, the attributes of a thing thus denominated being those which things ordinarily so described have...the connotation of the phrase in the Act must be determined by one’s general knowledge of the extent of the denotation of the phrase in common parlance...I have come to the conclusion that there is no single attribute of a superannuation fund established for the benefit of employees except that it must be a fund bona fide devoted as its sole purpose to providing for employees who are participants money benefits (or benefits having a monetary value) upon their reaching a prescribed age. In Mahony v Commissioner of Taxation (1967) 41 ALJR 232; (1967) 14 ATD 519, Kitto J stated: There was no definition in the Act of ‘a provident, benefit or superannuation fund’, and the meaning of the several expressions must therefore be arrived at in light of ordinary usage and with only one piece of assistance to be gathered from the immediate context. Since a fund, if its income was to be exempt under the provision, was separately required to be one established for the benefit of employees, each of the three descriptive words ‘provident’, ‘benefit’ and ‘superannuation’ must be taken to have connoted a purpose narrower than the purpose of conferring benefits, in a completely general sense, upon employees. Precise definition may be difficult, and in any case is unnecessary for present purposes. All that need be recognized is that just as ‘provident’ and ‘superannuation’ both referred to the provision of a particular kind of ‘benefit’ - in the one case a provision against contemplated contingencies, and in the other case a provision, to arise on an employee's retirement or death or other cessation of employment, of a subvention for him or his estate or persons towards whom he may have stood in some kind of relation commonly giving rise to a legal or moral responsibility – so ‘benefit’ must have meant a benefit, not in a general sense, but characterized by some specific future purpose. A funeral benefit is a familiar example. In Cameron Brae Pty Limited v FCT (2007) 161 FCR 468; [2007] FCAFC 135; 2007 ATC 4936, the Full Federal Court held that the relevant fund was a superannuation fund for the purposes of former section 82AAE of the ITAA 1936. Jessup J at [106] stated: In answering the question whether the fund was a “superannuation fund” as the term is ordinarily understood, it is, in my view, critical that payments could not have been made out of the fund (other than by way of administration expenses, taxation, etc) save to members of the relevant discretionary class, and save in circumstances which fell within the ordinary understanding of superannuation. A proper characterisation of the fund should, in my view, depend upon the purposes for which the assets and moneys of the fund might have been used rather than upon the quality of the rights of individual members of the fund. If the fund could have been used only to achieve what might be described as a superannuation purpose, I would describe the fund as a “superannuation fund”. That a particular member of a discretionary class might not, ultimately, have received any payment, was not, in my view, disqualifying. 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). Having regard to the terms of the deed of the Plan, it is considered that the Plan is a 'provident, benefit, superannuation or retirement fund' as that phrase has been interpreted by the relevant authorities. The sole purpose of the Plan is the provision of benefits to, or in respect of, participating employees who: ● cease their employment upon or after reaching retirement age (age 60) ● cease their employment after the satisfaction of certain service requirements ● cease their employment because of death or total and permanent disability, or ● reach age 70, whether or not they have ceased employment. Therefore, the Plan satisfies subparagraph (a)(ii) of the definition of 'superannuation fund for foreign residents' in section 118-520 of the ITAA 1997. The above guidance 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). The rules of the Pension Plan provide retirement, disability, death and survivor benefits to members of the Pension Plan and their dependents. The Pension Plan is a defined benefit scheme where the benefits paid to the relevant contributor are calculated based on a number of factors defined by the Plan rules, including salary, credited service, and the age of the member drawing benefits. The accumulation component is subject to the same restrictions with respect to use of and access to the monies as the defined benefit component. There are no benefits provided by the Fund to contributors and beneficiaries beyond those as prescribed above and in the Pension Plan rules. The Commissioner accepts that the alternate circumstances of access to the funds, being incapacity, death, the transfer of funds to another retirement fund, and a cash refund of the commuted value in exceptional circumstances align to the contemplated contingencies of a provident, benefit, superannuation or retirement fund. All monies managed by Entity A as trustee of the Fund are used solely for the purposes of administering and paying out benefits under the Pension Plan. The Fund therefore satisfies this requirement. The Fund was established in a foreign country The Fund was established in and is a tax resident of a foreign country. Therefore the Fund will satisfy this requirement. The Fund was established and is maintained only to provide benefits for individuals who are not Australian residents The Fund was established in a foreign country for the Pension Plan members, being employees of eligible employers. It is considered that the possibility of a very small number of members being returned residents or becoming Australian residents after ceasing eligible employment is incidental and should not be taken to conclude that the Fund, in this case, has not been established and is not maintained only to provide benefits for non-residents, based on the rules and operation of the Pension Plan. Therefore, the Fund will satisfy this requirement. The Fund’s central management and control is carried on outside Australia by entities none of whom is an Australian resident 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 in respect of the central management and control (CM&C) of a superannuation fund: 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. Furthermore, paragraphs 10 and 11 of Taxation Ruling TR 2018/5 Income tax: central management and control test of residency (TR 2018/5) states: 10. Central management and control refers to the control and direction of a company’s operations. It does not refer to a physical location in which the control and direction of a company is located and may ultimately be exercised in more than one location. 11. The key element in the control and direction of a company’s operations is the making of high-level decisions that set the company’s general policies and determine the direction of its operations and the type of transactions it will enter. The Pension Plan and Fund together is a pension scheme established in a foreign country by a combination of statute and the Pension Plan rules. It is administered by Entity A, with Entity B providing oversight. Entity A’s objectives are to act as administrator of the Pension Plan, trustee of the Fund, and to advise and assist Entity B. Its duties include administering the pension plans, establishing investment policies, designing, implementing, and reviewing investment strategy and performance, allocating and investing the assets of the pension plans, providing for the actuarial valuation of the pension plans, and provide reasonable technical and administrative support for Entity B. All of these duties are performed in a foreign country by Entity A’s representatives. Entity A is a non-resident company. Based on these facts, it is reasonable to conclude that the central management and control of the Fund is not exercised in Australia. As such, the Fund satisfies this requirement. No amount paid to the Fund or set aside for the Fund has been or can be deducted under the ITAA 1997 and no tax offset has been allowed or is allowable for such an amount An amount paid to the Fund or set aside for the Fund has not been and cannot be deducted under the ITAA 1997. A tax offset has not been allowed nor would be allowable for any amount paid to the Fund or set aside for the Fund. Therefore, the Fund will satisfy this requirement. 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. Consists of interest or dividend and/or non-share dividends paid by a company that is a resident Paragraph 128B(3)(jb) of the ITAA 1936 will only apply to interest, or to dividends and non-share dividends paid by Australian resident companies. The Fund will receive interest income from its direct Australian investments, along with dividend and non-share dividend income from companies who are residents of Australia for tax purposes. Therefore, the Fund will satisfy this requirement. Is exempt from income tax in the country in which the non-resident resides The Fund is exempt from income tax in the country which it is resident. The Fund therefore satisfies this requirement. | Detailed Reasoning - Conclusion: As all the requirements of paragraph 128B(3)(jb) of the ITAA 1936 are satisfied, Entity A as trustee of the Fund will be entitled to a withholding tax exemption under paragraph 128B(3)(jb) of the ITAA 1936 in relation to investments that it holds directly in Australia from which it derives interest, dividend and non-share dividend income. | Detailed Reasoning - Question 2: Is interest, dividend and non-share dividend income derived by Entity A as trustee of the Fund on its investments into Australia not assessable and not exempt income of the Fund under section 128D of the ITAA 1936? | Detailed Reasoning - Detailed reasoning: Section 128D of the ITAA 1936 provides: Income other than income to which section 128B applies by virtue of subsection (2A), (2C) or (9C) of that section upon which withholding tax is payable, or upon which withholding tax would, but for paragraph 128B(3)(ga),(jb) or (m), section 128F, section 128FA or section 128GB, be payable, is not assessable income and is not exempt income of a person. Section 128D of the ITAA 1936 provides that, inter alia , where withholding tax would be payable but for the operation of paragraph 128B(3)(jb) of the ITAA 1936, the income is not assessable income and is not exempt income. The interest, dividend and non-share dividend income derived by Entity A as trustee of the Fund from its Australian investments will not be assessable income or exempt income under section 128D of the ITAA 1936 because the aforementioned income: ● would have been subject to withholding tax, and ● is not exempt from withholding tax under any provision other than paragraph 128B(3)(jb) of the ITAA 1936. | Detailed Reasoning - Conclusion: The interest, dividend and non-share dividend income derived by Entity A as trustee of the Fund from its direct investments into Australia is not assessable and not exempt income of the Fund under section 128D of the ITAA 1936. | Detailed Reasoning - Question 3: Is the Fund a ‘foreign superannuation fund’ for the purposes of subsection 275-20(4) of the ITAA 1997? | Detailed Reasoning - Detailed reasoning: Section 275-20 of the ITAA 1997 sets out the widely-held requirements for managed investment trusts. Specifically, paragraph 275-20(4)(c) of the ITAA 1997 states that subsection 275-20(4) of the ITAA 1997 will cover: A complying superannuation fund, a complying approved deposit fund, or a foreign superannuation fund, being a fund that has at least 50 members. The Pension Plan has over half a million members. As such, it is only necessary to consider whether the Fund is a foreign superannuation fund. ‘Foreign superannuation fund’ is defined in subsection 995-1 of the ITAA 1997 as: (a) A superannuation fund is a foreign superannuation fund at a time if the fund is not an Australian superannuation fund at that time; and (b) A superannuation fund is a foreign superannuation fund for an income year if the fund is not an Australian superannuation fund for the income year. The term Australian superannuation fund is defined in subsection 995-1(1) of the ITAA 1997 as having the meaning given by section 295-95 of the ITAA 1997. Subsection 295-95(2) of the ITAA 1997 states A superannuation fund is an Australian superannuation fund at a time, and for the income year in which that time occurs, if (a) The fund was established in Australia, or any asset of the fund is situated in Australia at that time, and (b) At that time, the central management and control of the fund is ordinarily in Australia; and (c) At that time either the fund had no member covered by subsection 3(an active member) or at least 50% of (i) The total market value of the fund’s assets attributable to superannuation interests held by active members; or (ii) The sum of the amounts that would be payable to or in respect of active members if they voluntarily ceased to be members Is attributable to superannuation interests held by active members who are Australian residents. With respect to the Fund, the Fund was not established in Australia, but holds Australian assets. As previously established, the Fund’s central management and control is not in Australia, and instead occurs in a foreign country. As such, the Fund does not satisfy paragraph 295-95(2)(b) of the ITAA 1997 and therefore cannot be an Australian superannuation fund. As such, the Fund must qualify as a superannuation fund for it to be a foreign superannuation fund. Section 10 of the Superannuation Industry (Supervision) Act 1993 defines superannuation fund as (a) A fund that (i) Is an indefinitely continuing fund; and (ii) Is a provident, benefit, superannuation or retirement fund, or (b) a public sector superannuation scheme. As established in question 1, the Fund is an indefinitely continuing fund that provides retirement benefits. It meets the two requirements outlined above in subsection 10(a) of the Superannuation Industry (Supervision) Act 1993 for the reasons stated in Question 1 of the ruling. As the Fund was not established in Australia, does not have its central management and control in Australia, and satisfies the definition of a superannuation fund, the Fund is considered a foreign superannuation fund for the purposes of paragraph 275-20(4)(c). | Detailed Reasoning - Question 4: Are wholly owned subsidiaries of the Fund covered under paragraph 275-20(4)(k) of the Income Tax Assessment Act 1997 (ITAA 1997)? | Detailed Reasoning - Detailed reasoning: Section 275-20 of the ITAA 1997 sets out the widely-held requirements for managed investment trusts. Specifically, paragraph 275-20(4)(k) of the ITAA 1997 states that subsection 275-20(4) of the ITAA 1997 will cover: (k) An entity, all the membership interests in which are owned by any of the following: (i) Entities mentioned in the preceding paragraphs of this subsection; (ii) Entities that are wholly-owned by entities mentioned in the preceding paragraphs of this subsection (iii) Entities that are covered under this subsection because of a previous operation of this paragraph. ‘Membership interests’ is defined in section 960-135 of the ITAA 1997. The membership interests in a company are its shares. For a unit trust, its membership interests are the units of the trust. Entity A, in the course of investing the Fund, incorporates companies to invest the Fund assets through. These companies are wholly owned subsidiaries of the Fund. As the Fund has been determined in Question 3 of this Ruling to be an entity covered by a preceding paragraph, being paragraph 275-20(4)(c) of the ITAA 1997, its wholly owned subsidiaries will also be entities covered by subsection 275-20(4). As such, where an investor in a managed investment trust is a wholly owned subsidiary of the Fund, it will satisfy subsection 275-20(4) for the purposes of the widely held requirements.