Private ruling: Withholding tax - foreign superannuation fund
Date of advice: 3 September 2025
Published: 3 November 2025
Ruling period: 1 July 20XX to 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the Fund excluded from liability to withholding tax on interest and dividend income derived from its Australian investments in accordance with paragraph 128B(3)(jb) of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: Yes | Q2: Will the Fund's interest and dividend income from its Australian investments be not assessable income and not exempt income under section 128D of the ITAA 1936? | A2: Yes

Relevant facts and circumstances: The Fund is an indefinitely continuing fund that was established in a country that is not Australia. The Fund is governed by its articles of association and is required to comply with certain legislation and policy regulations. The Fund was established, and is maintained, only to provide pension benefits to its members. The Fund's members are employees of certain industries and are not residents of Australia. The Fund is not a public sector or governmental pension fund. The Fund receives contributions from its members and their employers. The Fund provides pension benefits to members upon their retirement. In the event of a member's death, the Fund provides pension benefits to the member's surviving partner and/or children. The Fund also provides pension benefits to members before their retirement but only in situations of occupational disability. The Fund invests directly into Australia via a custodian and receives interest and dividend income from its investments. In respect of its Australian investments, the Fund does not at any time: • hold more than 1% of the issued securities in any one entity • have any involvement in the day-to-day management of the business of any of the entities • have any right to appoint a director to the board of directors or trustee of those entities • have any right to representation on any investor representative or advisory committee (or similar) of those entities • have any ability to direct or influence the operation of those entities outside of the ordinary rights conferred by the investment held • enter into or receive any side letters, arrangements or agreements; or • hold any veto rights on security holder votes. The Fund's central management and control is carried on outside Australia by persons none of whom are Australian residents. An amount paid to the Fund, or set aside for it, has not been and cannot be deducted under the ITAA 1936 or Income Tax Assessment Act 1997 (ITAA 1997). A tax offset has not been allowed nor would be allowable for an amount that is paid to, or set aside for, the Fund. The Fund's income is not 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 (Transitional Act). The Fund is not a resident of Australia for tax purposes and is exempt from income tax in its country of residence.

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: Detailed Reasoning - Detailed reasoning: Section 128B imposes a liability on non-residents to pay withholding tax on certain kinds of income, such as interest and dividends. Paragraph 128B(3)(jb) provides that section 128B does not apply to income that: (i) is derived by a non-resident that is a superannuation fund for foreign residents (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. Paragraph 128B(3CA) states that paragraph 128B(3)(jb) applies to income derived by a non-resident that is a superannuation fund for foreign residents only if: (a) the superannuation fund satisfies the portfolio interest test in subsection 128B(3CC) in relation to the entity mentioned in subsection 128B(3CB) (the test entity) (i) at the time the income was derived; and (ii) throughout any 12 month period that began no earlier than 24 months before that time and ended no later than that time; and (b) the superannuation fund does not, at the time the income was derived, have influence of a kind described in subsection 128B(3CD) in relation to the test entity; and (c) the income is not non-assessable non-exempt income of the superannuation fund because of: (i) Subdivision 880-C of the ITAA 1997; or (ii) Division 880 of the Transitional Act. The Fund is a non-resident that is a superannuation fund for foreign residents 'Superannuation fund for foreign residents' is defined, through subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, as having the meaning given by section 118-520 of the ITAA 1997. Subsection 118-520(1) states that 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 (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. However, a fund is not a superannuation fund for foreign residents if: an amount paid to the fund or set aside for the fund has been or can be deducted under the ITAA 1936or the ITAA 1997; or a tax offset has been allowed or is allowable for such an amount (subsection 118-520(2)). | Detailed Reasoning - The Fund is an indefinitely continuing fund: The term 'indefinitely continuing fund' in subparagraph 118-520(1)(a)(i) is not defined in the ITAA 1936 nor the ITAA 1997. The term 'fund' is also not defined in the ITAA 1936 nor the ITAA 1997. Therefore, these terms should be given their ordinary meaning subject to the context in which they appear and having regard to any relevant case law authorities. The Australian Oxford Dictionary , 2004, Oxford University Press, Melbourne defines 'indefinitely' as 1 for an unlimited time. 2 in an indefinite manner...and 'indefinite' as 1 vague, undefined. 2 unlimited. The Australian Oxford Dictionary , 2004, Oxford University Press, Melbourne also defines '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. Federal Commissioner of Taxation (No 2) (1966) 14 ATD 333 ( 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 capitalized'. Windeyer J's views in Scott were cited with approval by Hill J in Walstern v. Commissioner of Taxation [2003] FCA 1428 who stated that 'for present purposes, the point is the need for "money" and "other property" to constitute a fund'. As there is no indication of the Fund ending at a defined point in time, it is considered an indefinitely continuing fund and subparagraph 118-520(1)(a)(i) is satisfied. | Detailed Reasoning - The Fund is a provident, benefit, superannuation or retirement fund: None of the descriptors 'provident', 'benefit', 'superannuation' or 'retirement fund' in subparagraph 118-520(1)(a)(ii) are defined. The terms have, however, been the subject of judicial consideration. In Scott, Windeyer J stated the following in relation to 'superannuation fund': 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 essential 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 this connexion 'fund', I take it, ordinarily means money (or investments) set aside and invested, the surplus income therefrom being capitalized. In Mahony v. Federal Commissioner of Taxation (1967) 14 ATD 519, Kitto J stated the following: 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 the 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. In Cameron Brae Pty Limited v Commissioner of Taxation [2007] FCAFC 135, Jessup J stated the following: 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. The courts, in the above cases, 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. The Fund provides retirement benefits or disability benefits to its members or, in the event of a member's death, death benefits to the member's surviving partner and/or children. Accordingly, the Fund is considered a provident, benefit, superannuation or retirement fund and subparagraph 118-520(1)(a)(ii) is satisfied. | Detailed Reasoning - The Fund was established in a foreign country: Paragraph 118-520(1)(b) is satisfied as the Fund was established in a foreign country. | Detailed Reasoning - The Fund was established, and is maintained, only to provide benefits for individuals who are not Australian residents: The Fund was established, and is maintained, only to provide pension benefits to its members. The Fund's members are employees of certain industries and are not residents of Australia. Therefore, it is considered that the Fund has satisfied paragraph 118-520(1)(c). It is considered that the possibility of a very small number of members being returned residents or becoming Australian residents after ceasing eligible employment or retiring is incidental and should not be taken to conclude that the Fund had not established and maintained only to provide benefits for non-residents. | Detailed Reasoning - 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 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. Furthermore, paragraphs 10 and 11 of Taxation Ruling TR 2018/5 Income tax: central management and control test of residency 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. Paragraph 118-520(1)(d) is satisfied as the Fund's central management and control is carried on outside Australia by persons none of whom are Australian residents. No amount paid to the Fund or set aside for it has been or can be deducted under the ITAA 1936 or the ITAA 1997 and no tax offset has been allowed or is allowable for such an amount The Fund confirmed that an amount paid to, or set aside for, it has not been or cannot be deducted under the ITAA 1936 or the ITAA 1997. A tax offset has not been allowed nor would be allowable for an amount that is paid to, or set aside for, the Fund. Accordingly, subsection 118-520(2) does not apply and the Fund is considered a 'superannuation fund for foreign residents'. As the Fund is not a resident of Australia for tax purposes, subparagraph 128B(3)(jb)(i) is satisfied. The Fund's income from its investments consists of interest and dividends paid by companies that are residents of Australia The Fund derives interest and dividend income from companies that were incorporated in Australia and are residents of Australia as defined in section 6. Accordingly, subparagraph 128B(3)(jb)(ii) is satisfied. The Fund's income from its investments is exempt from income tax in its country of residence Subparagraph 128B(3)(jb)(iii) is satisfied as the Fund's income from its Australian investments is exempt from income tax in its country of residence. The Fund satisfies the portfolio interest test in subsection 128B(3CC) Subsection 128B(3CC) states that a superannuation fund satisfies the portfolio interest test in relation to the test entity (the entity mentioned in subsection 128B(3CB)) if, at that time, the total participation interest (within the meaning of the ITAA 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. Subsection 128B(3CB) defines the test entity to be either the entity that paid the interest, dividends or non-share dividends or, if subsection 128A(3) applies in relation to a resident trust estate, that trust estate. In respect of its Australian investments, the Fund does not, at any time, hold more than 1% of the issued securities in any one entity. Accordingly, the Fund satisfies the portfolio interest test in respect of its Australian investments from which it derives interest and dividend income and the requirement in paragraph 128B(3CA)(a) is met. The Fund did not, at any time, have influence of a kind described in subsection 128B(3CD) Subsection 128B(3CD) states that a superannuation fund has influence of a kind described in subsection 128B(3CD) 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). With respect to all of its Australian investments, the Fund does not at any time: • hold more than 1% of the issued securities in any one entity • have any involvement in the day-to-day management of the business of any of the entities • have any right to appoint a director to the board of directors or trustee of those entities • have any right to representation on any investor representative or advisory committee (or similar) of those entities • have any ability to direct or influence the operation of those entities outside of the ordinary rights conferred by the investment held • enter into or receive any side letters, arrangements or agreements; or • hold any veto rights on security holder votes. Accordingly, the Fund does not have influence of a kind described in subsection 128B(3CD) and paragraph 128B(3CA)(b) is satisfied. The Fund's interest and dividend income from its Australian investments is not non-assessable non-exempt income because of Subdivision 880-C of the ITAA 1997 or Division 880 of the Transitional Act Paragraph 128B(3CA)(c) is satisfied as the Fund's income is not non-assessable non-exempt income because of Subdivision 880-C of the ITAA 1997 or Division 880 of the Transitional Act. As each requirement of subsection 128B(3CA) is satisfied, paragraph 128B(3)(jb) applies to exclude the Fund from liability to withholding tax on the interest and dividend income it derives from its Australian investments. | Detailed Reasoning - Detailed reasoning: Section 128D states that 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. Paragraph 128B(3)(jb) applies to exclude the Fund from liability to withholding tax on the interest and dividend income derived from its Australian investments. Accordingly, the interest and dividend income derived from those investments will be not assessable income and not exempt income under section 128D.

Reasons for decision: All legislative references are to the ITAA 1936 unless otherwise stated.