• Section C: Your question/s and facts

    Q7 - Questions and issues to be answered by the Commissioner

    Questions

    The following is a suggested wording. If you use your own wording please note that the appropriate sections of the ITAA 1936 must be quoted in your questions to the Commissioner.

    The applicant wishes the Commissioner to rule on the following:

    1. Is the trustee of the XYZ Pension Fund exempt from income tax on its interest and/or dividend income derived from Australia under paragraph 23(jb) of the ITAA 1936?
       
    2. Is the trustee of the XYZ Pension Fund excluded from liability to withholding tax on its interest and/or dividend income derived from Australia under paragraph 128B(3)(a) of the ITAA 1936?

    If the application relates to a master/group trust situation, the following is a suggested wording:

    1. Is the trustee of the XYZ master/group trust exempt from income tax on its interest and/or dividend income derived from Australia on behalf of the participating plans under paragraph 23(jb) of the ITAA 1936?
       
    2. Is the trustee of the XYZ master/group trust excluded from liability to withholding tax on its interest and/or dividend income derived from Australia on behalf of the participating plans under paragraph 128B(3)(a) of the ITAA 1936?
    Issues

    The first issue to be addressed in the ruling is whether the XYZ Pension Fund qualifies as a foreign superannuation fund as defined in subsection 6(1) of the ITAA 1936 and thus the trustee is exempt from income tax on its interest and dividend income derived from Australia under paragraph 23(jb) of the ITAA 1936.

    If the trustee of the XYZ Pension Fund is exempt from income tax under paragraph 23(jb) of the ITAA 1936, the second issue to be addressed is whether the trustee is also excluded from liability to interest and/or dividend withholding tax under paragraph 128B(3)(a) of the ITAA 1936.

    The following is a suggested wording for this question

    The applicant requests that the Commissioner address the following issues:

    1. Does the XYZ Pension Fund qualify as a 'foreign superannuation fund' as defined in subsection 6(1) of the ITAA 1936 and, therefore, is the trustee exempt from income tax on its interest and/or dividend income derived from Australia under paragraph 23(jb) of the ITAA 1936?
       
    2. If the trustee of the XYZ Pension Fund is exempt from income tax under paragraph 23(jb) of the ITAA 1936, is the trustee also excluded from liability to interest and/or dividend withholding tax under paragraph 128B(3)(a) of the ITAA 1936?

    For a master/group trust situation, the following is suggested wording for the question:

    1. Do the participating plans qualify as 'foreign superannuation funds' as defined in subsection 6(1) of the ITAA 1936 and are the trustees therefore exempt from income tax on their interest and/or dividend income derived from Australia under paragraph 23(jb) of the ITAA 1936?
       
    2. If the trustees of the participating plans are exempt from income tax under paragraph 23(jb) of the ITAA 1936, are the trustees also excluded from liability to interest and/or dividend withholding tax under paragraph 128B(3)(a) of the ITAA 1936?

    Q8 - Facts describing the scheme or circumstance

    The following documentation must be included with the application:

    1. A certification, advice or letter, issued within the last three years, from the taxation authority in the particular country where the entity is resident, confirming that the entity is exempt from income tax on its interest and dividend income in that country.

    It is important to note that if the entity is not exempt from income tax on its interest and/or dividend income in its home country, withholding tax exemption under paragraph 128B(3)(a) of the ITAA 1936 cannot be granted.

    1. A copy of the trust deed for the entity or other founding document which established the entity, including a copy of the entity rules, showing how it operates and with details of the superannuation benefits and entitlements provided.
       
    2. A statement from the trustee of the entity advising that:
       

    a. The entity was established in a country outside Australia.
     

    b. The entity 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 of the Commonwealth.
     

    c. The central management and control of the entity is carried on outside Australia by persons none of whom is a resident of Australia or a resident of a Territory of the Commonwealth.
     

    d. The entity is not one 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 the ITAA 1936 or Income Tax Assessment Act 1997 (ITAA 1997).
     

    1. Copies of the entity's annual financial reports for the last two years.
       
    2. If available, a copy of any publication, brochure or pamphlet issued to entity members which explain the entity and benefits available.

    If the application relates to a master/group trust situation then the following additional information must be included with the application:

    1. A list of the participating funds in the master/group trust.
       
    2. A copy of the rules of at least three of the participating funds (this should include details of pension and retirement benefits to fund members - to determine if a fund is a pension/retirement fund set up solely to provide superannuation benefits). Note: if there are less than three participating funds, substitute that number.
       
    3. A copy of any letter or certificate, issued within the last three years, from the taxation authority in the particular country where the master/group trust is resident confirming that it is qualified and also exempt from income tax on its interest and dividend income in that country.
       
    4. A copy of any letter or certificate issued within the last three years, from the taxation authority in the particular country where the participating funds are resident, for each of these participating funds (as per point two above) in the master/group trust confirming that they are qualified and also exempt from income tax on their interest and dividend income in that country
       
    5. A statement from the trustee of the master/group trust advising that:
       

    a. The participating funds were established in a country outside Australia.
     

    b. The participating funds were established, and are 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.
     

    c. The central management and control of the participating funds are carried on outside Australia by persons none of whom is a resident of Australia or a resident of a Territory.
     

    d. The participating funds are not funds 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 the Australian income tax legislation.

    It should be noted that both the trustees of the master/group trust and the trustees of the participating funds within the master trust are required to be exempt from income tax in their country of residence.

    A brief factual description of the XYZ Pension Fund with references to the supporting documentation can be provided.

    Q9 - Your opinions and references

    It is not expected that the applicant provide a legal argument on the issues under consideration. However, the following brief comment for this question is suggested (if the applicant wishes to do so, it may still provide its own legal arguments as to why it considers the XYZ Pension Fund qualifies as a foreign superannuation fund etc):

    Suggested wording:

    In accordance with the documentation supplied, the trust deed and fund rules in particular show that the XYZ Pension Fund has been established as a genuine pension, superannuation and/or retirement fund solely providing superannuation benefits for non-residents of Australia. It has been set up and maintained outside of Australia by non-residents of Australia. Furthermore, no contributions to the XYZ Pension Fund are capable of being claimed as a rebate or deduction under any section of the ITAA 1936 or ITAA 1997. The trustee of the XYZ Pension Fund is exempt from income tax in the country of residence.

    Accordingly, the applicant is of the opinion that the XYZ Pension Fund qualifies as a foreign superannuation fund as defined in subsection 6(1) of the ITAA 1936, and that its income from interest and dividends derived from Australia is exempt from income tax under paragraph 23(jb) of the ITAA 1936.

    Since the trustee of the XYZ Pension Fund is also exempt from income tax in the country of residence, paragraph 128B(3)(a) of the ITAA 1936 provides for the exemption from liability to withholding tax on the interest and dividend income it derives from Australia.

    Suggested wording for a master/group trust situation:

    In accordance with the documentation supplied, the trust deed and fund rules in particular show that the XYZ master/group trust has been established as a pooled investment vehicle for the assets/funds of the participating qualified funds and the participating funds have been established as genuine pension, superannuation and/or retirement funds solely providing superannuation benefits for non-residents of Australia. They have been set up and maintained outside of Australia by non-residents of Australia. Furthermore, no contributions to the participating funds are capable of being claimed as a rebate or deduction under any section of the ITAA 1936 or ITAA 1997. The trustees of XYZ master/group trust and the participating funds are exempt from income tax in the country of residence.

    Accordingly, the applicant is of the opinion that the participating funds qualify as foreign superannuation funds as defined in subsection 6(1) of the ITAA 1936 and that XYZ Master/Group Trust's income from interest and/or dividends derived from Australia on behalf of the participating funds is exempt from income tax under paragraph 23(jb) of the ITAA 1936.

    Since the trustees of the XZY master/group trust and the participating funds are also exempt from income tax in the country of residence, paragraph 128B(3)(a) of the ITAA 1936 provides for the exemption from liability to withholding tax on the interest and/or dividend income the XYZ master/group trust derives from Australia on behalf of the participating funds.

    Quote the following sections:

    • Subsection 6(1) of the Income Tax Assessment Act 1936
    • Paragraph 23(jb) of the Income Tax Assessment Act 1936
    • Paragraph 128B(3)(a) of the Income Tax Assessment Act 1936
      Last modified: 30 Jan 2008QC 17551