ATO Interpretative Decision
ATO ID 2009/78
Income Tax
Non-assessable and Non-exempt Income - Dividends: non-share dividends and interest of a superannuation fund for foreign residentsFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is income to which paragraph 128B(3)(jb) of the Income Tax Assessment Act 1936 (ITAA 1936) applies, not assessable and not exempt income under section 128D of the ITAA 1936?
Decision
Yes. Income to which paragraph 128B(3)(jb) of the ITAA 1936 applies is not assessable and not exempt income under section 128D of the ITAA 1936.
Facts
The taxpayer is a 'non-resident' as defined in subsection 6(1) of the ITAA 1936.
The taxpayer is the trustee of a superannuation fund (the fund).
The fund was established in the taxpayer's country of residence and is a superannuation fund for foreign residents under section 118-520 of the Income Tax Assessment Act 1997 (ITAA 1997) and a 'foreign superannuation fund' under the definition of that term in subsection 995-1(1) of the ITAA 1997.
In its capacity as the trustee of the fund, the taxpayer derived income in the 2007-08 income year consisting of dividends and non-share dividends paid by Australian resident companies and interest.
The income derived by the taxpayer is income to which paragraph 128B(3)(jb) of the ITAA 1936 applies.
Reasons for Decision
For present purposes, section 128D of the ITAA 1936 provides that income upon which withholding tax would, but for certain provisions including paragraph 128B(3)(jb) of the ITAA 1936, be payable, is not assessable income and is not exempt income of a person.
The definition of 'person' in subsection 6(1) of the ITAA 1936 provides that, unless the contrary intention appears, the term 'person' includes a company. The definition of the term 'non-resident' in subsection 6(1) states that, unless contrary intention appears, a non-resident is a 'person who is not a resident of Australia'.
Subsection 128A(10) of the ITAA 1936 provides that, for the purposes of Division 11A of the ITAA 1936, the trustee of a provident, benefit, superannuation or retirement fund is a non-resident at a particular time if, and only if, the fund is a foreign superannuation fund at that time.
Given that subsection 128A(10) of the ITAA 1936 treats the trustee to be the non-resident for the purposes of Division 11A of the ITAA 1936, the trustee of a provident, benefit, superannuation or retirement fund is a non-resident and, therefore, 'a person' for the purposes of section 128D of the ITAA 1936.
Subsections 128B(4) and 128B(5) of the ITAA 1936 provide that a person who derives income to which section 128B of the ITAA 1936 applies is liable to pay dividend and interest withholding tax on the dividends and interest it derives. Paragraph 128AAA(1)(c) of the ITAA 1936 provides that Division 11A of Part III of the ITAA 1936 applies to non-share dividends in the same way as it applies to dividends. Disregarding any application of paragraph 128B(3)(jb) of the ITAA 1936, the taxpayer would be liable to pay tax under subsections 128B(4) and 128B(5).
However, because the dividends, non-share dividends and interest derived by the taxpayer is income to which paragraph 128B(3)(jb) of the ITAA 1936 applies, that income is excluded from being income that is subject to withholding tax by the operation of this paragraph.
Therefore, the dividend and interest income received by the taxpayer is income upon which withholding tax would, but for paragraph 128B(3)(jb) of the ITAA 1936, be payable under subsections 128B(4) and 128B(5) of the ITAA 1936. Accordingly, this income is not assessable and not exempt income of the taxpayer under section 128D of the ITAA 1936.
Date of decision: 13 July 2009Year of income: Year ended 30 June 2008
Legislative References:
Income Tax Assessment Act 1936
Division 11A of Part III
subsection 6(1)
subsection 128A(10)
paragraph 128AAA(1)(c)
section 128B
paragraph 128B(3)(jb)
subsection 128B(4)
subsection 128B(5)
section 128D
section 118-520
subsection 995-1(1) Related ATO Interpretative Decisions
ATO ID 2001/320
ATO ID 2001/334
Keywords
Withholding tax exemptions
Dividend income
Non resident dividend withholding tax
Non resident interest withholding tax
Non-assessable non-exempt income
Superannuation funds
Non resident superannuation funds
ISSN: 1445-2782