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Edited version of private ruling
Authorisation Number: 1011804191849
Ruling
Subject: Exemption from Income tax/Withholding tax
Question 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 Income Tax Assessment Act 1936 (ITAA 1936)?
Answer: Yes.
Question 2:
Is interest and/or dividend income derived by the trustee of 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:
Financial year ended 30 June 2007
The scheme commences on
1 July 2006
Relevant facts and circumstances
The applicant has applied for a private ruling for the foreign superannuation fund.
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..
· Letter from the tax authorities in the country of residence of the fund certifying that the fund is exempt from taxation and is a resident of that country for purposes of taxation.
· Copies of the financial statements for the 2006, 2007 and 2008 years.
· A copy of the rules governing the pension plan which provides 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 128B(3)(jb),
Income Tax Assessment Act 1936 Section 128D.
Reasons for decision
The term 'foreign superannuation fund' is defined in subsection 6(1) of the ITAA 1936 as follows:
'foreign superannuation fund' means, subject to subsection 6(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.
For the financial year ended 30 June 2007, 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 foreign superannuation fund; and
ii. consists of interest, 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.
As mentioned above, it is considered that the pension 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 by the taxation authorities of the country of residence of the pension fund confirms that the fund is exempt on its interest and dividend income in the country of residence. 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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