1012753677548 | Legal database

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Edited version of your written advice

Authorisation Number: 1012753677548

Ruling

Subject: Foreign super fund withholding

Question 1:

Is the trustee of the Master/Group Trust and its participating funds excluded from liability to withholding tax on its interest and/or dividend income derived from Australia on behalf of the participating funds under paragraph 128B(3)(jb) of the ITAA 1936?

Yes.

Question 2

Is interest and/or dividend income derived from Australia by the trustee of the Master/Group Trust on behalf of its participating funds not assessable and not exempt income under section 128D of the ITAA 1936?

Yes.

This ruling applies for the following period:

1 July 20XX to 30 June 2019.

The scheme commenced on

1 July 20XX.

Relevant facts and circumstances

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

The superannuation fund concerned is a master/group trust with participating funds.

The application includes the following:

• Documents identifying the participating funds of the master/group trust as:

1. Fund 1.

2. Fund 2.

3. Fund 3.

• A letter from the relevant taxation authority certifying each participant of the master/group trust is a resident of a country outside Australia.

• A Letter from the relevant taxation authority certifying the master/group trust is exempt from income tax in its country of residence.

• Evidence that each of the participating funds is exempt from taxation in their country of residence.

• A copy of the Declaration of Trust for the master/group trust which provides details of the establishment of the master/group trust and its participating funds, the benefits provided by the funds, and the rules governing the master/group trust and its participating funds.

• A statement from the trustee of the master/group trust advising that at the time of making the statement:

• 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 1997, and

• a tax offset has not been allowed or is not allowable for such an amount.

• A copy of the financial statements of the participating funds for the 2012 and 2013 financial 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

Section 128D of the Income Tax Assessment Act 1936 (ITAA 1936) provides that interest and dividend income that is excluded from withholding tax pursuant to paragraph 128B(3)(jb) of the ITAA 1936 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:

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.

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 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;

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

Perusal of the documents provided indicates master/group trust and its participating funds satisfy 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 master/group trust and its participating funds 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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