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Ruling

Subject: Exemption from income tax & withholding tax

Question 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?

Answer:

Yes.

Question 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?

Answer:

Yes.

This ruling applies for the following period:

Financial year ended 30 June 2008

Financial year ended 30 June 2009

Financial year ended 30 June 2010

Financial year ended 30 June 2011

Financial year ended 30 June 2012

Financial year ending 30 June 2013

Financial year ending 30 June 2014

Financial year ending 30 June 2015

The scheme commenced on

1 July 2007

Relevant facts and circumstances

The applicant has applied for a private ruling for a superannuation fund for foreign residents.

The application includes the following documentation:

A copy of a statement from the trustee of 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 Income Tax Assessment Act 1997 (ITAA 1997) and the Income Tax Assessment Act 1936 (ITAA 1936) 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 an overseas registered pension fund and is exempt from tax in respect of income from investments and deposits.

· Copies of the financial statements.

· A copy of the fund document 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 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.

Income Tax Assessment Act 1997 Section 118-520

Reasons for decision

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:

· is derived by a non-resident that is a foreign superannuation fund; and

· consists of interest, or 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 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 tax authorities in the country in which the non-resident resides confirms that the fund is exempt on its interest and dividend income in this country. Accordingly, the interest and/or dividend income of the fund is excluded from withholding tax pursuant to paragraph 128(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 financial 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, or 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 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;

(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 trustee 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.

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