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Edited version of your written advice
Authorisation Number: 1012757777732
Ruling
Subject: Foreign pension funds and exemption from withholding tax
Questions and answers
1. Is the trustee of the Pension Trust and its participating funds 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 Pension Trust and its participating funds non-assessable income of the fund under section 128D of the ITAA 1936?
Yes.
This ruling applies for the following periods:
Year ending 30 June 2008
Year ending 30 June 2009
Year ending 30 June 2010
Year ending 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
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 2007
Relevant facts and circumstances
The applicant has applied for a private ruling for the superannuation fund for foreign residents.
The application includes the following documentation:
Relating to the Pension Trust
• Statement from the trustee of the Master Trust 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 a tax offset has not been allowed or is not allowable for such an amount.
• Letter from the foreign authorities, certifying that the Master Trust is a registered pension fund and is exempt from tax in respect of interest and dividend income in that country.
• A link to the most recent financial reports for the Master Trust.
• A declaration from the trustee that the Master Trust is a superannuation fund for non-residents.
• A copy of the trust deed which provides details of rules and benefits available to the members.
Relating to the participating funds
• Copies of statements from trustees of the participating funds confirming that the participating funds are indefinitely continuing funds and are provident, benefit, superannuation or retirement funds, were established in a foreign country, were established and maintained only to provide benefits for individuals who are not Australian residents, the central management and control of the funds are carried on outside Australia by entities none of whom is an Australian resident, an amount paid to the funds or set aside for the funds has not been or cannot be deducted under the Income Tax Assessment Act 1997 (ITAA 1997) and a tax offset has not been allowed or is not allowable for such an amount.
• Letters from the foreign authorities, certifying that each of the participating funds is exempt from tax in respect of interest and dividend income from that country.
• A declaration provided by the trustee of each of the participating pension fund confirming that each fund is a superannuation fund for non-residents.
• A link to the most recent financial reports for each participating fund.
• Recent publications issued to members in respect of each participating pension fund explaining the pension plan and the benefits available to members.
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 trust deed and fund rules indicate that the Master Trust and its participating funds have been established to provide pension and superannuation benefits for the members. On the basis of the information provided, it is considered that the funds are superannuation funds for foreign residents as defined in section 118-520 of the ITAA 1997. The statements from the trustee of the Master Trust and the participating funds also confirm that the requirements of the definition have been met.
The tax authorities in the country of residence of the fund have certified that the Master Trust and participating funds are exempt from income tax in respect of income from investments and deposits.
Accordingly the interest and/or dividend income of the Master Trust and its participating funds 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) of the ITAA 1936 is not assessable income.
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