Edited version of private advice

Authorisation Number: 1052355042954

Date of advice: 31 January 2025

Ruling

Subject: Foreign superannuation fund - withholding tax exemption

Question

Is Fund A excluded from liability to withholding tax on dividend and non-share dividend income derived on the investments in accordance with paragraph 128B(3)(jb) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The Fund

1.            Fund A was established in Country X, which is not Australia.

2.            Fund A is not a resident of Australia for tax purposes.

3.            Fund A manages the assets of the pension system in Country X.

4.            The primary responsibility of Fund A is the management of member contributions and the payment of pension savings upon retirement of members.

5.            Fund A has a board of directors which is responsible for the general management activities of Fund A. Members of the board are appointed based on their education and industry experience.

Benefits

6.            The key benefits provided by Fund A are:

a.          Normal retirement: the pension is paid by Fund A to a member upon the member reaching normal retirement age. The normal retirement age in Country X is 6X for men and 6X for women.

b.          Pre-retirement disability: benefits can be paid where a member becomes significantly disabled.

c.          Termination of residence: Benefits can be paid to those who have terminated their residence in Country X.

d.            Funeral benefit: A member's family can receive a one time payment for funeral costs of the member.

e.            Death benefit: Where a member dies, their pension funds are paid to their estate.

7.            A member may apply for a lump sum payment (LSP) for the purpose of improving housing conditions or to pay for medical expenses for themselves or close relatives. Access to this benefit is contingent on the member having a defined minimum balance in their pension account.

a.          Where the LSP is for the payment of medical expenses. Only expenses arising from an approved list of medical conditions provides eligibility for a member to apply for an LSP.

b.          Where the LSP is for the improvement of housing conditions, the following are permitted purposes to obtain the LSP:

            i.     Payment of final settlement under a contract of sale for a residential dwelling.

            ii.     Deposits for obtaining a mortgage for the purchase of a residential dwelling.

            iii.     Repayment of mortgage on a residential dwelling.

            iv.     Payment of costs associated with the construction of a residential dwelling

Australian Investments

8.            Fund A has a portfolio of Australian equity investments that have the following characteristics:

a.          All are listed on the Australian Securities Exchange (ASX).

b.          Fund A holds less than 10% of the total participation interests in each Australian company, trust, or real estate investment trust (REIT).

c.          Fund A would hold less than 10% of the total participation interests in each Australian company, trust or REIT in the circumstances detailed in paragraph 128B(3CC)(b) of the ITAA 1936.

d.          Neither Fund A, nor any related party of Fund A, has involvement in the day-to-day management of the business of any of the Australian companies, trusts or REITs.

e.          Neither Fund A, nor any related party of Fund A, has the right to appoint a director to the Board of Directors of any of the Australian companies or to an equivalent role in a trust or REIT.

f.          Neither Fund A, nor any related party of Fund A, holds the right to representation on any investor representative or advisory committee (or similar) for any of the Australian companies, or a similar role for a trust or REIT.

g.          Neither Fund A, nor any related party of Fund A, has the ability to direct or influence the operation of any of the Australian companies, trusts or REITs outside of the ordinary rights conferred by the equity interest held.

h.          Fund A only holds rights to vote in proportion to its equity interest in each Australian company, trust or REIT.

Additional Facts

9.            Fund A's head office is located in Country X.

10.            Fund A is indefinitely continuing and there is no intention to terminate or wind up Fund A at this time.

11.            Fund A has not and cannot deduct amounts under either the Income Tax Assessment Act 1997 (ITAA 1997) or the ITAA 1936 for amounts paid to it.

12.            Fund A has not been allowed a tax offset or a tax offset is not allowable for an amount that has been paid to it.

13.            Fund A is only established to provide payments/benefits for individuals who are not Australian residents.

14.            Fund A's central management and control is carried on outside Australia by entities none of whom are Australian residents.

15.            Fund A is exempt from taxation in Country X.

16.            Income of Fund A is not non-assessable non-exempt income because of:

a.          Subdivision 880-C of the ITAA 1997, or

b.          Division 880 of the Income Tax (Transitional Provisions) Act 1997.

Relevant legislative provisions

Income Tax Assessment Act 1936 paragraph 128B(3)(jb)

Reasons for decision

Section 128B of the ITAA 1936 imposes liability to withholding tax on income derived by a non-resident that consists of dividend income (subsection 128B(1) of the ITAA 1936), interest income (subsection 128B(2) of the ITAA 1936) and other income prescribed in that section.

Subsection 128B(3) of the ITAA 1936 notes that section 128B of the ITAA 1936 will not apply to prescribed categories of income. Relevantly, paragraph 128B(3)(jb) of the ITAA 1936 states:

(jb) income that:

(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;

Subitem 3(1) of Part 2 of Schedule 3 of Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Act 2019 (2019 Act) provides (subject to subitems (2) and (3)) that for income derived from 1 July 2019, the extra requirements in subsection 128B(3CA) of the ITAA 1936 must also be met.

These requirements are considered below.

Income that is derived

For paragraph 128B(3)(jb) of the ITAA 1936 to apply, the superannuation fund for foreign residents must derive the relevant income.

Fund A is the entity which holds the relevant investments and is paid the dividend from the Australian resident companies, trusts or REITs. The Commissioner therefore accepts that Fund A derives the relevant income.

Therefore, Fund A satisfies this requirement.

A non-resident

Fund A is not a resident of Australia for tax purposes. Therefore, Fund A satisfies this requirement.

A superannuation fund for foreign residents

The term 'superannuation fund for foreign residents' is a defined term in section 6 of the ITAA 1936 which states:

superannuation fund for foreign residents has the meaning given by subsection 995-1(1) of the ITAA 1997.

Subsection 995-1(1) of the ITAA 1997 sets out that:

superannuation fund for foreign residents has the meaning given by section 118-520.

Section 118-520 of the ITAA 1997 states the following:

(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.

(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.

Consequently, for Fund A to be considered a superannuation fund for foreign residents for the purposes of paragraph 128B(3)(jb) of the ITAA 1936, it must be established that:

•                     Fund A is an indefinitely continuing fund

•                     Fund A is a provident, benefit, superannuation or retirement fund

•                     Fund A was established in a foreign country

•                     Fund A was established and maintained only to provide benefits for individuals who are not Australian residents

•                     The central management and control of Fund A is carried on outside of Australia by entities, none of whom are Australian residents

•                     No amount paid to Fund A or set aside for Fund A has been or can be deducted under this Act, and

•                     No tax offsets have been allowed or would be allowable for an amount paid to Fund A or set aside for Fund A.

These requirements are considered below.

The fund is an indefinitely continuing fund

The legislation provides no guidance on the meaning of 'indefinitely continuing'. It is not a technical legal expression, and the ordinary meanings of 'indefinitely' and 'continuing' involve little ambiguity or controversy.

The Macquarie Dictionary, [Online], viewed 20XX, www.macquariedictionary.com.au defines 'indefinitely' and 'continuing' as follows:

Indefinite:

1.          not definite; without fixed or specified limit; unlimited: an indefinite number.

2.          not clearly defined or determined; not precise.

indefinitely, adverb

Continue: (verb (Continued, continuing))

1.          to go forwards or onwards in any course or action; keep on.

2.          to go on after suspension or interruption.

3.          to last or endure.

4.          to remain in a place; abide; stay.

5.          to remain in a particular state or capacity

There is no indication that there is any contemplation of Fund A ending at a defined point in time and there is no expectation that Fund A will be discontinued.

Therefore, it is accepted that Fund A is an indefinitely continuing fund.

The fund is a provident, benefit, superannuation or retirement fund

The phrase 'provident, benefit, superannuation or retirement fund' under subparagraph 118-520(1)(a)(ii) of the ITAA is not defined in either the ITAA 1997 or the ITAA 1936.

ATO Interpretative Decision ATO ID 2009/67 Income Tax: Superannuation fund for foreign residents (ATO ID 2009/67) provides guidance on the meaning of the phrase 'provident benefit, superannuation or retirement fund':

None of the four descriptors 'provident', 'benefit', 'superannuation' or 'retirement fund' in subparagraph (a)(ii) of the definition of 'superannuation fund for foreign residents' in section 118-520 of the ITAA 1997 are defined. The terms have, however, been the subject of judicial consideration.

The courts have held that for a fund to be a 'provident, benefit, superannuation or retirement fund', the fund's sole purpose must be to provide superannuation benefits, that is, benefits to a member upon the member reaching a prescribed age or upon their retirement, death or other cessation of employment (Scott v. FC of T (No 2) (1966) 14 ATD 333; (1966) 10 AITR 290, per Windeyer J; Mahony v. FC of T (1967) 14 ATD 519, per Kitto J; Walstern Pty Ltd v. Commissioner of Taxation (2003) 138 FCR 1; 2003 ATC 5076; (2003) 54 ATR 423, per Hill J and Cameron Brae Pty Ltd v. Federal Commissioner of Taxation (2007) 161 FCR 468; 2007 ATC 4936; (2007) 67 ATR 178, per Stone and Allsop JJ).

Having regard to the terms of the deed of the Plan, it is considered that the Plan is a 'provident, benefit, superannuation or retirement fund' as that phrase has been interpreted by the relevant authorities. The sole purpose of the Plan is the provision of benefits to, or in respect of, participating employees who:

•                    cease their employment upon or after reaching retirement age (age 60)

•                    cease their employment after the satisfaction of certain service requirements

•                    cease their employment because of death or total and permanent disability, or

•                    reach age 70, whether or not they have ceased employment.

Therefore, the Plan satisfies subparagraph (a)(ii) of the definition of 'superannuation fund for foreign residents' in section 118-520 of the ITAA 1997.

The above establishes that for a fund to qualify as a provident, benefit, superannuation or retirement fund, it must have the sole purpose of providing retirement benefits or benefits in other allowable contemplated contingencies (such as death, disability or serious illness).

Broadly, Fund A provides benefits to members as follows:

1)            Normal retirement: A pension to be paid upon reaching normal retirement age. Current retirement age is 6X for women and 6X for men.

2)            Pre-retirement disability: Benefits can be paid where a member becomes significantly disabled.

3)            Termination of residence: Benefits can be paid to those who have terminated their residence in Country X.

4)            Funeral benefits: Where a member dies, the member's family can be paid a one-time payment for funeral costs.

5)            Death: Where a member dies, their pension funds are paid to their estate.

6)            Payment of medical expenses: Members may apply to withdraw a LSP to pay for specified medical expenses for themselves or their close relatives.

7)            Payment to improve housing conditions: Members may apply to withdraw a LSP to pay for the improvement of housing conditions for themselves or their close relatives.

Baker v Federal Commissioner of Taxation,2015 ATC 10-399; [2015] AATA 469(Baker) considered foreign funds and whether a US Individual Retirement Account (IRA) was a foreign superannuation fund. An IRA is a savings product which has a number of purposes, one of which is to encourage saving for retirement with favourable tax treatment.

In Baker at paragraph [16], O'Loughlin SM in considering the judgments of Kitto, Taylor and Windeyer JJ in Mahony and Allsop, Stone and Jessup JJ in Cameron Brae Pty Ltd v. Federal Commissioner of Taxation (2007) 161 FCR 468 stated that a trust arrangement that is not a provident fund, benefit fund or retirement fund, that allows for payment of superannuation style benefits and other benefits not permitted by the Supervision Act will not be a superannuation fund. This is a reference to the definition of a superannuation fund, under section 10 of the Superannuation Industry (Supervision) Act 1993 (Cth) (the Supervision Act), which includes, as an element to meet the definition, the need to be a 'provident, benefit, superannuation or retirement fund'.

The decision in Baker was reached due to the broad range of benefits that may be accessed at any time and for multiple purposes that are arguably not for 'provident, benefit, superannuation or retirement' purposes. An IRA is not considered to satisfy the requirements of a 'provident, benefit, superannuation or retirement fund'.

Paragraph 29 of Bakerprovided:

There does appear, however, to be a fundamental difference between the Australian and USA regimes that are directed to incentivise retirement planning and saving. The USA regime does not appear to have prohibitions on activities that can be undertaken within a concessionally taxed structure intended to incentivise retirement saving, or by those who control those structures, to the same degree as in Australia. ... Importantly, under the USA regime, money can be withdrawn at any time prior to any retirement event at the complete discretion of the IRA holder. Any amount can be released or withdrawn at any time. Retirement income, or superannuation payments or payments in the nature of superannuation payments are but possibilities under the IRA structure rather than what is an essential feature of the structure by reason of limitations in or the scope of the formal terms and conditions of the structure. [emphasis added]

Paragraph 32 of Baker went on to state:

While it can readily be accepted that the USA IRA is a method that might be commonly adopted and used to plan and save for retirement income, that such planning and saving is incentivized by means that have their parallels in Australia, that these vehicles and the concessions that are afforded to them if certain behaviors are observed are part of a strategy designed by the USA government to encourage self-provision for and in retirement, the restrictive features required of trusts so as to be superannuation funds for Australian income tax purposes do not accommodate the flexible structures that appear to be promoted in the USA to achieve equivalent purposes in Australia. [emphasis added]

Paragraph 34 of Bakerconcluded by stating that the flexibility of monetary withdrawals from an IRA is such that payments in the nature of superannuation payments from it are but one of a number of possibilities.

Fund A allows members to apply for a LSP for the purposes of improving housing conditions. This benefit permits a member to draw down the balance of their pension contributions for the purpose of paying for final settlement, making a deposit to obtain housing loans, or to partially or wholly repay debt on a mortgage housing loan. While differences exist between Fund A and an IRA plan, the Commissioner considers that the members' opportunity to access these LSPs for the purpose of improving housing conditions as being analogous to the features that exhibited flexibility in the Baker decision and were determined to be inconsistent with Australian superannuation fund laws.

While LSPs may be paid for the improvement of housing conditions during retirement, this is considered too remote to the provision of retirement benefits as these benefits are also capable of being accessed many years prior to the prescribed age of retirement. That is, the specific purpose of these withdrawals is too remote from the broad statement of intention of assisting members prepare for retirement or enhancing their post-retirement lifestyle. Further to this, the capacity of a close relative of a member to benefit from such LSPs is not aligned with the intention of assisting the member prepare for retirement.

Therefore, it is necessary to consider whether the withdrawal of LSPs for the purpose of improving housing conditions in the context of whether Fund A is a provident or benefit fund.

In relation to the definition of a 'provident, benefit or superannuation fund' Kitto Jin Mahony v Commissioner of Taxation (1967) 41 ALJR 232; (1967) 14 ATD 519, stated the following:

Precise definition may be difficult, and in any case is unnecessary for present purposes. All that need be recognized is that just as 'provident' and 'superannuation' both referred to the provision of a particular kind of 'benefit' - in the one case a provision against contemplated contingencies, and in the other case a provision, to arise on an employee's retirement or death or other cessation of employment, of a subvention for him or his estate or persons towards whom he may have stood in some kind of relation commonly giving rise to a legal or moral responsibility - so 'benefit' must have meant a benefit, not in a general sense, but characterized by some specific future purpose. A funeral benefit is a familiar example.

Based on the above, it can be broadly identified that:

•                     'Provident' refers to "a provision against contemplated contingencies"

•                     'Benefit' refers to "a benefit, not in a general sense, but characterised by some specific future purpose. A funeral benefit is a familiar example, and

•                     'Superannuation' refers to "a provision, to arise on an employee's retirement or death or other cessation of employment, of a subvention for him or his estate or persons towards whom he may have stood in some kind of relation commonly giving rise to a legal or moral responsibility".

The terms 'provident' and 'benefit' may refer to funds that have features including medical, funeral, sickness, hospital and dental cover. Withdrawals for these reasons are to address a future need or contingency (as in the High Court case of Mahony referred to above). However, these benefits do not include withdrawals for the purpose of improving housing conditions for a member or their close relatives. Such withdrawals may assist members with preparing for retirement and enhancing the value of life post-retirement but they only do so in an indirect way and are more directly related to improving a member's pre-retirement lifestyle.

The opportunity to apply for and receive LSPs to improve the housing conditions of a member (or their close relative) has no bearing on the member's retirement nor is it strictly for their benefit. Additionally, unlike situations where IRA or 401(k) accounts make up a nominal or ancillary amount of accounts or assets held, every member with an adequate pension balance is eligible to seek LSPs for this purpose.

Therefore, for the purposes of subparagraph 118-520(1)(a)(ii) of the ITAA 1997, the Commissioner does not consider the benefits of Fund A align with the sole purpose of providing retirement benefits or benefits in other allowable contemplated contingencies. As such, Fund A is not considered to be a 'provident, benefit, superannuation or retirement fund'.

The fund was established and maintained only to provide benefits for individuals who are not Australian residents

Fund A was established in Country X and operates to provide retirement benefits for members in Country X. It is possible that Australian residents, having formerly worked in Country X, may obtain a benefit from Fund A, however, these instances should not be taken to conclude that Fund A has not been established and is not maintained only to provide benefits for non-residents.

Therefore, Fund A satisfies this requirement.

The fund's central management and control is carried on outside Australia by entities none of whom is an Australian resident

Paragraphs 20 and 21 of Taxation Ruling TR 2008/9 Income tax: meaning of 'Australian superannuation fund' in subsection 295-95(2) of the Income Tax Assessment Act 1997 (TR 2008/9) states:

20. The CM&C of a superannuation fund involves a focus on the who, when and where of the strategic and high level decision making processes and activities of the fund. In the context of the operations of a superannuation fund, the strategic and high level decision making processes includes:

-                    formulating the investment strategy for the fund;

-                    reviewing and updating or varying the fund's investment strategy as well as monitoring and reviewing the performance of the fund's investments;

-                    if the fund has reserves - the formulation of a strategy for their prudential management; and

-                    determining how the assets of the fund are to be used to fund member benefits.

21. The other principal areas of operation of a superannuation fund that form part of the day-to-day or operational side of the fund's activities will not constitute CM&C. These activities do not form part of the CM&C of the fund because they are not of a strategic or high level nature. Rather, these activities are of a more formalistic or administrative nature. Examples of such activities include the acceptance of contributions that are made on a regular basis, the actual investment of the fund's assets, the fulfilment of administrative duties and the preservation, payment and portability of benefits.

Furthermore, paragraphs 10 and 11 of the Taxation Ruling TR 2018/5 Income tax: Central Management and Control test of residency (TR 2018/5) states:

10.Central management and control refers to the control and direction of a company's operations. It does not refer to a physical location in which the control and direction of a company is located, and may ultimately be exercised in more than one location.

11. The key element in the control and direction of a company's operations is the making of high-level decisions that set the company's general policies, and determine the direction of its operations and the type of transactions it will enter.

Fund A has a board of directors. The board of directors is responsible for the organisation and management of Fund A. The directors of Fund A are residents of Country X.

Based on the above, it is reasonable to conclude that the central management and control of Fund A occurs in Country X by entities that are not Australian residents.

Therefore, Fund A satisfies this requirement.

No amount paid to the fund or set aside for the fund has been or can be deducted under the ITAA 1997 and no tax offset has been allowed or is allowable for such an amount

No amount paid to or set aside for Fund A has been or can be deducted under the ITAA 1997. A tax offset has not been allowed nor would be allowable for any amount paid to Fund A or set aside for Fund A.

Therefore, Fund A satisfies this requirement.

Conclusion

As all of the above requirements are not satisfied, Fund A does not meet the requirements of being a superannuation fund for foreign residents as defined by section 118-520 of the ITAA 1997.

Income that consists of interest, or consists of dividends or non-share dividends paid by a company that is a resident

Paragraph 128B(3)(jb) of the ITAA 1936 will only apply to interest, or to dividends and non-share dividends paid by Australian resident companies. Fund A derives dividend income from companies who are residents of Australia for tax purposes.

Therefore, Fund A satisfies this requirement.

Income that is exempt from income tax in the country in which the non-resident resides

Fund A has declared that it is exempt from taxation in Country X.

The Commissioner has accepted based on the facts and circumstances that Fund A is exempt from taxation in Country X.

Therefore, Fund A satisfies this requirement.

Subsection 128B(3CA) of the ITAA 1936

The Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Act 2019 introduced extra requirements in subsection 128B(3CA) of the ITAA 1936 that must be met for paragraph 128B(3)(jb) of the ITAA 1936 to apply. Generally, these extra requirements apply to income derived from 1 July 2019.

Subsection 128B(3CA) of the ITAA 1936 states:

(3CA) Paragraph (3)(jb) applies to income derived by the superannuation fund mentioned in subparagraph (3)(jb)(i) only if:

(a)         the superannuation fund satisfies the portfolio interest test in subsection (3CC) in relation to the entity mentioned in subsection (3CB) (the test entity):

(i)        at the time the income was derived; and

(ii)        throughout any 12 month period that began no earlier than 24 months before that time and ended no later than that time; and

(b)         the superannuation fund does not, at the time the income was derived, have influence of a kind described in subsection (3CD) in relation to the test entity; and

(c)         the income is not non-assessable non-exempt income of the superannuation fund because of:

(i)        Subdivision 880-C of the Income Tax Assessment Act 1997; or

(ii)        Division 880 of the Income Tax (Transitional Provisions) Act 1997.

These requirements are considered below.

The fund satisfies the 'portfolio interest test'

Subsection 128B(3CC) of the ITAA 1936 states:

A superannuation fund satisfies the portfolio interest test in this subsection in relation to the test entity at a time if, at that time, the total participation interest (within the meaning of the Income Tax Assessment Act 1997) the superannuation fund holds in the test entity:

(a)         is less than 10%; and

(b)         would be less than 10% if, in working out the direct participation interest (within the meaning of that Act) that any entity holds in a company:

(i)        an equity holder were treated as a shareholder; and

(ii)        the total amount contributed to the company in respect of non-share equity interests were included in the total paid-up share capital of the company.

Fund A holds less than 10% of the total participation interests in each of the Test Entities. Further, Fund A would hold less than 10% of the total participation interests in each of the Test Entities in the circumstances detailed in paragraph 128B(3CC)(b) of the ITAA 1936.

Fund A therefore satisfies the 'portfolio interest test' in respect of its current investments.

The fund satisfies the 'influence test'

Subsection 128B(3CD) of the ITAA 1936 states:

A superannuation fund has influence of a kind described in this subsection in relation to the test entity at a time if any of the following requirements are satisfied at that time:

(a)         the superannuation fund:

(i)        is directly or indirectly able to determine; or

(ii)        in acting in concert with others, is directly or indirectly able to determine;

the identity of at least one of the persons who, individually or together with others, make (or might reasonably be expected to make) the decisions that comprise the control and direction of the test entity's operations;

(b)         at least one of those persons is accustomed or obliged to act, or might reasonably be expected to act, in accordance with the directions, instructions or wishes of the superannuation fund (whether those directions, instructions or wishes are expressed directly or indirectly, or through the superannuation fund acting in concert with others).

As such, there are two distinct sub-tests within the influence test.

Sub-test 1 of the influence test, as contained in paragraph 128B(3CD)(a) of the ITAA 1936, assesses whether the superannuation fund is able to determine the identity of at least one of the persons who, individually or together with others, makes or is reasonably expected to make, decisions comprising the control and direction of the test entity's operations. This includes situations where the superannuation fund is able to act in concert with others to determine the identity of a relevant decision-maker in the test entity.

Sub-test 1 also extends to situations where the superannuation fund, in its own right, holds the ability to approve or veto decisions which go to the control or direction of the test entity.

Sub-test 2 of the influence test, as contained in paragraph 128B(3CD)(b) of the ITAA 1936, assesses whether at least one of the relevant decision-making persons of the test entity is accustomed or obliged to act, or might reasonably be expected to act, in accordance with the direction, instructions or wishes of the superannuation fund.

In respect of the Australian investments:

a)            Neither Fund A, nor any related party of Fund A, has involvement in the day-to-day management of the business of any of the Australian companies, trusts or REITs.

b)            Neither Fund A, nor any related party of Fund A, has the right to appoint a director to the Board of Directors of any of the Australian companies or to an equivalent role in a trust or REIT.

c)            Neither Fund A, nor any related party of Fund A, holds the right to representation on any investor representative or advisory committee (or similar) for any of the Australian companies or a similar role for the trusts or REITs.

d)            Neither Fund A, nor any related party of Fund A, has the ability to direct or influence the operation of any of the Australian companies, trusts or REITs outside of the ordinary rights conferred by the equity interest held.

e)            Fund A has not entered into or received any side letters, arrangements or agreements.

f)            Fund A only holds rights to vote in proportion to its equity interest in each Australian company, trust or REIT and does not hold any veto rights on security holder votes.

Based upon the above, the Commissioner accepts that Fund A does not have influence of a kind described in subsection 128B(3CD) of the ITAA 1936.

Otherwise non-assessable non-exempt

The income received by Fund A from the Australian investments will not be non-assessable non-exempt income consequent to the operation of Subdivision 880-C of the ITAA 1997 or Division 880 of the Income Tax (Transitional Provisions) Act 1997.

Therefore, Fund A satisfies this requirement.

Conclusion

As subparagraph 118-520(1)(a)(ii) of the ITAA 1997 has not been satisfied, Fund A is not excluded from withholding tax in relation to interest, dividend and non-share dividend income derived from its Australian investments under paragraph 128B(3)(jb) of the ITAA 1936.

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