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Edited version of your written advice
Authorisation Number: 1012691131130
Ruling
Subject: Foreign pension fund and exemption from withholding tax
Questions and answers
1. Is the trustee of the 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 ITAA 1936?
Yes.
2. Is interest and/or dividend income derived from Australia by the trustee of the Pension Fund non-assessable income of the fund under section 128D of the ITAA 1936?
Yes.
This ruling applies for the following period:
1 July 2011 to 30 June 2012.
1 July 2012 to 30 June 2013.
1 July 2013 to 30 June 2014.
1 July 2014 to 30 June 2015.
1 July 2015 to 30 June 2016.
1 July 2016 to 30 June 2017.
1 July 2017 to 30 June 2018.
1 July 2018 to 30 June 2019.
The scheme commenced on
1 July 2011.
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 was established in a country outside Australia.
• The fund was established, and is maintained and applied for the sole purpose of providing superannuation benefits for persons other than persons who are, or would ordinarily be or become residents of Australia or residents of a Territory of the Commonwealth.
• The central management and control of the fund is carried on outside Australia by persons none of whom is a resident of Australia or a resident of a Territory of the Commonwealth.
• The fund is not one for which an amount has been set aside, or to which an amount has been paid, by a taxpayer that is an amount that has been allowed or is allowable as a deduction, or in respect of which a rebate of tax has been allowed or is allowable, under any provision of the Income Tax Assessment Act 1936 (ITAA 1936) or the Income Tax Assessment Act 1997 (ITAA 1997).
• 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,
• the fund was established in a foreign country,
• the fund 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 ITAA 1997 and
• a tax offset has not been allowed or is not allowable for such an amount.
• A letter from the overseas tax authorities certifying the fund is exempt from income tax in that country.
• Certificates of residency from the tax authorities in that country attesting to the fact that the fund is exempt from income tax to the best of their knowledge and belief.
• Copies of the financial statements of the fund.
• A copy of the fund document which provides details of the benefits provided by the fund and the rules governing the fund.
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 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:
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 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.