Edited version of private ruling

Authorisation Number: 1011604320224

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Ruling

Subject: Exemption from Income tax/Withholding tax

Issue 1

Questions

1. Is the trustee of the overseas based superannuation fund exempt from income tax on its dividend and/or interest income derived from Australia under paragraph 23(jb) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer: Yes

2. Is the trustee of the overseas based superannuation fund excluded from liability to withholding tax on its interest and/or dividend income derived from Australia under paragraph 128B(3)(a) of ITAA 1936?

Answer: Yes.

This ruling applies for the following period:

Year ended 30 June 2003

Year ended 30 June 2004

The scheme commenced on:

1 July 2002

Issue 2

Questions

1. Is the trustee of the overseas based superannuation fund excluded from liability to withholding tax on its interest and/or dividend income derived from Australia under paragraph 128B(3)(jb) of the ITAA 1936?

Answer: Yes.

2. Is interest and/or dividend income derived by the trustee of the overseas based superannuation fund non-assessable income of the fund under section 128D of the ITAA 1936?

Answer: Yes.

This ruling applies for the following period:

Year ended 30 June 2010

Year ending 30 June 2011

Year ending 30 June 2012

Year ending 30 June 2013

Year ending 30 June 2014

The scheme commenced on

1 July 2009

Relevant facts and circumstances

The application includes the following documentation:

· A copy of a statement from the trustee of the overseas based superannuation fund (the fund), confirming that the fund is an indefinitely continuing fund and a provident, benefit, superannuation or retirement fund, was established in a foreign country, 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.

· Letters from the tax authorities in the country of residence of the fund, certifying that the fund is a trust forming part of a pension, profit sharing or a stock bonus plan which is exempt from taxation and is a resident of that country for tax purposes for the years 2003 and 2010 respectively.

· Copies of annual financial reports for the years 2003, 2004, 2007 and 2008.

· A copy of the plan document providing 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 and

Income Tax Assessment Act 1997 Section 118-520.

Reasons for decision

Issue 1

Paragraph 23(jb) of the ITAA 1936 exempts from income tax the income of a foreign superannuation fund that consists of:

i. interest; or

ii. dividends or non-share dividends paid by a company that is a resident.

Paragraph 128B(3)(a) of the ITAA 1936 exempts interest and dividend income received by a non-resident from withholding tax where:

i. that income is exempt from income tax because of paragraph 23(jb) of the ITAA 1936; and

ii. it is exempt from income tax in the country in which the non-resident resides.

Foreign superannuation fund as defined in Subsection 6(1) of the ITAA 1936 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 of the Commonwealth of Australia; 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 of the Commonwealth of Australia;

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.

On the basis of the information provided, it is considered that the fund is a foreign superannuation fund as defined in subsection 6(1) of the ITAA 1936. The statement from the trustee of the fund also confirms that the requirements of this definition are met. Accordingly, the fund is exempt from Australian tax under paragraph 23(jb) of the ITAA 1936.

The statement from the tax authority of the country of residence of the fund certifies that the fund is a trust forming part of a pension, profit sharing or a stock bonus plan which is exempt from taxation and is a resident of that country for tax purposes for the years 2003 and 2010 respectively.

It has already been determined that the foreign superannuation fund is exempt from Australian income tax under paragraph 23(jb) of the ITAA 1936.

As the requirements of paragraph 128B(3)(a) of the ITAA 1936 have been met, the foreign superannuation fund qualifies for withholding tax exemption under that specific paragraph.

Issue 2

Reasons for decision

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;

For the years ended 30 June 2008 and onwards, 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 fund 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; or

(b) a tax offset has been allowed or is allowable for such an amount.

Perusal of the rules of the fund 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 the definition have been met.

The tax authorities in the country of residence of the fund certify that the fund is a trust forming part of a pension, profit sharing or stock bonus plan which is a resident of that country and is exempt from income tax in that country.

Accordingly the interest and/or dividend income of the fund is excluded from withholding tax pursuant to paragraph 128B(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.

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