Private ruling: Exemption from Australian withholding tax
Published: July 2014
Ruling period: Year ended 30 June 2004 | Year ended 30 June 2005 | Year ended 30 June 2006 | Year ended 30 June 2007 | Year ended 30 June 2008 | Year ended 30 June 2009 | Year ended 30 June 2010
Date scheme commenced: 1 July 2003

Ruling: Q1: Is the trustee of the fund exempt from income tax on its interest and/or dividend income derived from Australia under paragraph 23(jb) of the Income Tax Assessment Act 1936 (ITAA 1936) for the years ended 30 June 200X, 200Y and 200Z? | A1: Yes. | Q2: Is interest and/or dividend income derived by the trustee of the fund excluded from liability to withholding tax on its interest and/or dividend income derived from Australia under section 128B(3)(a) of the ITAA 1936 for the years ended 30 June 200X, 200Y and 200Z? | A2: Yes. Issue 2 | Q3: Is the trustee of the fund excluded from liability to withholding tax on its interest and/or dividend income derived from Australia under paragraph 128(3)(jb) of the ITAA 1936 for the years ended 30 June 200A, 200B, 200C and 200D? | A3: Yes. | Q4: Is interest and/or dividend income derived by the trustee of the fund non-assessable income of the fund under section 128D of the ITAA 1936 for the years ended 30 June 200A, 200B, 200C and 200D? | A4: Yes.

Relevant facts and circumstances: The applicant has applied for a private ruling for a superannuation fund for foreign residents. The application includes the following documentation: • Letters from the relevant authority certifying the fund was exempt from income tax in their relevant tax years. • A copy of the Articles of Association of the fund which provide details of the establishment of the fund, the benefits provided by the fund, and the rules governing the fund. • A statement confirming that: • the fund is an indefinitely continuing fund and 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 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 copy of the Annual Reports/financial statements of the fund for 2011 and 2012.

Relevant legislative provisions: Income Tax Assessment Act 1936 Paragraph 23(jb) | 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: Detailed Reasoning - Issue 1: The term foreign superannuation fund is defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) as follows: foreign superannuation fund means, subject to subsection (7A), a provident, benefit, superannuation or retirement fund: (a) that was established in a country outside Australia; (b) that was established, and is maintained and applied, for the sole purpose of providing superannuation benefits for persons other than persons who are, or would ordinarily be or become, residents of Australia or residents of a Territory; and (c) the central management and control of which is carried on outside Australia by persons none of whom is a resident of Australia or a resident of a Territory; Not being a fund for which an amount has been set aside, or to which an amount has been paid, by a taxpayer that is an amount that has been allowed or is allowable as a deduction, or in respect of which a rebate of tax has been allowed or is allowable, under any provision of this Act. Perusal of the rules indicates that the fund satisfied the definition of a foreign superannuation fund for the purposes of subsection 6(1) of the ITAA 1936. Under paragraph 23(jb) of the ITAA 1936, interest or dividends or non-share dividends received by a foreign superannuation fund were exempt from Australian income tax if at all times during the year of income, the entity was a foreign superannuation fund. As it is considered that this pension fund was a foreign superannuation fund at all times during the year of income, interest and/or dividends or non-share dividends received by the superannuation fund were exempt from Australian income tax under paragraph 23(jb) of the ITAA 1936. Paragraph 128(3)(b) of the ITAA 1936 exempts interest, dividend income or non-share dividends received by a foreign superannuation fund from Australian withholding tax if the income was exempt from income tax by virtue of paragraph 23(jb) of the ITAA 1936 and exempt from income tax in the country where the foreign superannuation fund resides. The certification from the relevant taxation department of the Department of the Treasury confirmed that the fund was exempt from income tax on its interest and dividend income in the foreign country. Accordingly the interest and/or dividend income of the fund is excluded from withholding tax pursuant to paragraph 128B(3)(a) of the ITAA 1936. | Detailed Reasoning - Issue 2: 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. 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 rules 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 this definition are met. Accordingly, the interest and/or dividend income of the fund is excluded from withholding tax and is not assessable income.