Private ruling: Exemption from Income tax/Withholding tax
Published: October 2012
Ruling period: Financial year ended 30 June 2000 | Financial year ended 30 June 2001 | Financial year ended 30 June 2002 | Financial year ended 30 June 2003 | Financial year ended 30 June 2004 | Financial year ended 30 June 2005 | Financial year ended 30 June 2006
Date scheme commenced: 1 July 1999

Ruling: Q2: Is the trustee of the master trust 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)(a) of the ITAA 1936? Yes

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The applicant has applied for a private ruling for the foreign superannuation fund/superannuation fund for foreign residents. The application includes the following documentation: · A list of all the participating funds created under the master trust agreement, identifying the participating funds open in Australia to which this ruling belongs. · A copy of a statement from the trustee of the master trust, confirming that: the participating funds are indefinitely continuing funds and are provident, benefit, superannuation or retirement funds, the participating funds were established in a foreign country, the participating funds were established, and are maintained, only to provide benefits for individuals who are not Australian residents, the central management and control of the participating funds are carried on outside Australia by entities none of whom is an Australian resident, an amount paid to the participating funds or set aside for the participating funds has not been or cannot be deducted under the ITAA 1936 and ITAA 1997 and a tax offset has not been allowed or is not allowable for such an amount. · Letters from the Tax Authorities in the country of residence of the master trust and participating funds certifying that the entity is exempt from income tax in that country. · A letter certifying that the entity is a group trust arrangement and each participant is a resident of the relevant country. · Copies of the Financial Statements for the 2010 and 2011 years for the participation funds to which this ruling applies. · A copy of the trust deed which provides details of rules and benefits available to the members.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) . | Income Tax Assessment Act 1936 Paragraph 23(jb ). | Income Tax Assessment Act 1936 Paragraph 128B(3)(a). | 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 ITAA 1936 as follows: · foreign superannuation fund means a provident, benefit, superannuation or retirement fund: · that was established in a country outside Australia; · 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 (even if pensions are paid out of the fund to the latter persons); and · 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 master trust (trust) and its participating funds satisfy 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 are 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 trust and its participating funds were foreign superannuation funds at all times during the year of income, interest and/or dividends or non share dividends received by the pension fund will be exempt from Australian income tax under paragraph 23(jb) of the ITAA 1936. Paragraph 128B(3)(a) 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 is 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 Tax Authorities confirms that the trust and its participating funds are exempt from income tax on their interest and/or dividend income in the country of residence. Accordingly, the interest and/or dividend income of the trust and its participating funds is excluded from withholding tax pursuant to paragraph 128B(3)(a) of the ITAA 1936 | Detailed Reasoning - Issue 2: For the financial year ended 30 June 2007, paragraph 128B(3)(jb) of the ITAA 1936 excludes interest and dividend income from withholding tax where that income: · is derived by a non-resident that is a foreign superannuation fund; and · consists of interest, or consists of dividends or non-share dividends paid by a company that is a resident; and · is exempt from income tax in the country in which the non-resident resides. As mentioned above, it is considered that the trust and its participating funds are foreign superannuation funds as defined in subsection 6(1) of the ITAA 1936. The statement by the trustee of the funds also confirms that the requirements of this definition are met. In addition, the certification from relevant Tax Authorities confirms that the trust and its participating funds are exempt on their interest and dividend income in the country of residence. Accordingly, the interest and/or dividend income of the trust and its participating funds is excluded from withholding tax pursuant to paragraph 128(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. 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: · is derived by a non-resident that is a superannuation fund for foreign residents; and · consists of interest, or consists of dividends or non share dividends paid by a company that is a resident; and · is exempt from income tax in the country in which the non-resident resides. The term 'superannuation 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 · it was established in a foreign country; and · it was established, and is maintained at that time, only to provide benefits for individuals who are not Australian residents; and · 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 trust 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 trust and its participating funds also confirms that the requirements of this definition are met. Accordingly, the interest and/or dividend income of the trust and its participating funds fund is excluded from withholding tax and is not assessable income.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Question 1: Is the trustee of the master trust exempt from income tax on its interest and/or dividend income derived from Australia on behalf of the participating funds under paragraph 23(jb) of the Income Tax Assessment Act 1936 (ITAA 1936)? | Question 1: Is the trustee of the master trust 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? | Question 2: Is interest and/or dividend income derived from Australia by the trustee of the master trust on behalf of the participating funds not assessable and not exempt income under section 128D of the ITAA 1936? | Financial year ended 30 June 2008 | Financial year ended 30 June 2009 | Financial year ended 30 June 2010 | Financial year ended 30 June 2011 | Financial year ended 30 June 2012 | Financial year ended 30 June 2013 | Financial year ended 30 June 2014 | Financial year ended 30 June 2015 | Financial year ended 30 June 2016