Edited version of private ruling

Authorisation Number: 1011641873231

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Withholding tax exemption

Issue 1

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

Yes.

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

Yes.

This ruling applies for the following period:

1 July 2004 to 30 June 2005

1 July 2005 to 30 June 2006

The scheme commences on:

1 July 2004

Issue 2:

1. Is the trustee of the 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?

Yes.

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

Yes.

This ruling applies for the following period:

1 July 2006 to 30 June 2007

1 July 2007 to 30 June 2008

1 July 2008 to 30 June 2009

1 July 2009 to 30 June 2010

1 July 2010 to 30 June 2011

1 July 2011 to 30 June 2012

1 July 2012 to 30 June 2013

The scheme commences on:

1 July 2006

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.

The application included the following documentation:

· A statement from the manager of the fund confirming that the fund was established outside Australia, was established and is maintained for non-residents of Australia, has its central management and control outside Australia and that any amount contributed to the Fund has not been allowed as a deduction under any provision of the ITAA

· Two letters from the taxation authority, confirming that the fund is exempt from income tax on its interest and dividend income in that country.

· A copy of the rules of the fund.

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 128(3)(jb)

Income Tax Assessment Act 1936 Section 128D

Income Tax Assessment Act 1997 Section 118-520.

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision

Issue 1

The term 'foreign superannuation fund' is defined in subsection 6(1) of the ITAA 1936 as follows:

"foreign superannuation fund" 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; 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;

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 fund satisfies 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 fund was a foreign superannuation fund at all times during the year of income, interest and/or dividends or non-share dividends received by the superannuation fund will be exempt from Australian income tax under paragraph 23(jb) of the ITAA 1936.

Paragraph 128B(3)(a) of the ITA 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 taxation authority in the particular country where the fund is resident confirms that the fund is exempt from income tax on its interest and dividend income in that country. Accordingly, the interest and/or dividend income of the fund is excluded from withholding tax pursuant to paragraph 128B(3)(a) of the ITAA 1936.

Issue 2

For the 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, 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 fund is a foreign superannuation fund as defined in subsection 6(1) of the ITAA 1936. The statement by the trustee of the fund also confirms that the requirements of this definition are met. In addition, the certification from the taxation authority in the particular country where the fund is resident confirms that the fund is exempt on its interest and dividend income 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.

For the 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, 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 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:

at that time, it is:

an indefinitely continuing fund; and

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; or

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

Perusal of the rules 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 manager of the fund also confirms that the requirements of this definition are met. Accordingly, the interest and/or dividend income of the fund is excluded from withholding tax and is not assessable income.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).