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Edited version of your private ruling
Authorisation Number: 1012479583510
Ruling
Subject: Exemption from Withholding tax
Questions and answers
1. Is the trustee of the overseas based pension 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)?
Yes.
2. Is interest and/or dividend income derived by the trustee of the overseas based pension fund non-assessable income of the fund under section 128D of the ITAA 1936?
Yes.
This ruling applies for the following periods:
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
Year ended 30 June 2018
Year ended 30 June 2019
The scheme commenced on:
1 July 2013
Relevant facts and circumstances
The applicant has applied for a private ruling for the trustee of the participating funds:
The application includes the following documentation:
A copy of a statement from the trustee confirming that:
· the participating funds are indefinitely continuing funds and are provident, benefit, superannuation or retirement funds,
· the participating funds were established in a foreign country,
· the participating funds were established, and are maintained, only to provide benefits for individuals who are not Australian residents,
· the central management and control of the participating funds are carried on outside Australia by entities none of whom is an Australian resident,
· an amount paid to the participating funds or set aside for the participating funds has not been or cannot be deducted under the ITAA 1936 and ITAA 1997 and
· a tax offset has not been allowed or is not allowable for such an amount.
The taxation authority of the country where the pension funds reside has made a statement that the pension funds are exempt from income tax in its country of residence.
A copy of the current rules governing the participating funds has been provided.
The rules set out the purpose of the pension fund, membership requirements of the pension fund, the types of benefits available to members of the pension fund, the manner in which benefits are calculated, death benefits and members' contributions.
Copies of financial statements for the relevant income years
Relevant legislative provisions
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
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 financial years ended 30 June 2008 and onwards, the term 'superannuation fund for foreign residents' is defined in section 118-520 of the ITAA 1997 as follows:
(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.
(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.
The copy of the rules governing the pension funds indicates that the pension funds managed by the trustee have been established to provide pension and superannuation benefits for the members. On the basis of the information provided, it is considered that the pension funds managed by the trustee are superannuation funds for foreign residents as defined in section 118-520 of the ITAA 1997. The statement from the trustee of the funds also confirms that the requirements of the definition have been met.
The taxation authority of the country where the pension funds reside in has made a statement that the pension funds are exempt from income tax in its country of residence. Accordingly, interest and/or dividend income or non share dividends derived by the foreign superannuation funds are 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 t o paragraph 128B(3)(jb) of the ITAA 1936 is not assessable income.
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