Edited version of your written advice

Authorisation Number: 1051316311502

Date of advice: 14 December 2017

Ruling

Subject: Superannuation fund for foreign residents

Question 1

Is the Fund exempt from liability to withholding tax on interest, dividend and non-share dividend income under paragraph 128B(3)(jb) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer

Yes.

Question 2

Is interest, dividend and non-share dividend income derived by the Fund not assessable and not exempt income of the Fund under section 128D of the ITAA 1936?

Answer

Yes.

Question 3

Is the Fund a ‘foreign superannuation fund’ for the purposes of paragraph 275-20(4)(c) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The Fund

1. The Fund was established as a pension scheme in Country A to provide retirement, death, disability and related benefits for the staff of Company A or another participating employer.

2. ABC Trust Limited is the corporate trustee which manages the Fund through a Board of Trustee Directors. The members of the board are generally residents of Country A and no board member is a resident of Australia.

3. The Fund is a Defined Benefit scheme which provides benefits based on a member’s salary and length of service. Its membership consists of eligible employees who started service with the Company or another participating employer on or before Closure Date A.

4. After Closure Date A, new employees joined the Defined Contribution section of the Fund which was called the Retirement Plan. The Retirement Plan operated until Closure Date B at which point all members’ benefits were transferred to another pension scheme not related to the Fund.

5. Prior to Closure Date B, persons met the eligibility criteria for membership in the Fund if they were an employee of the Company or another participating employer; and the Company notified the Trustee of the Fund and employee in writing they were joining the Fund.

6. From Date C, all active members had their membership status changed and became deferred members. These members no longer earn additional pension benefits in the Defined Benefit scheme.

7. Management of the Fund is delegated to internal staff, a number of external investment managers and overseen by the Board of Trustee Directors. There are also three Committees (with delegated powers from the corporate trustee), that manage the Fund in areas of governance, investment and audit.

8. The Fund has its registered office in Country A.

The Fund Rules

9. The Fund operates in accordance with the Fund Rules. The Fund Rules form part of the Scheme to which this Ruling relates.

10. A clause of the Fund Rules sets out the rules for the Trustees to invest assets of the Fund. These include acquiring and disposing of property, entering into contracts, lending or borrowing money, forming companies, carrying on a business, insuring assets and making other investments.

11. The circumstances of payment of pension entitlements are detailed the Fund Rules.

12. The Fund Rules set out conditions as to what age the members can access a pension from the Fund.

13. A clause of the Fund Rules provides when a pension may be paid by the Fund earlier than the Normal Retirement Date.

14. A clause of the Fund Rules sets out the choice for early leavers of the Fund to transfer or buy-out under certain circumstances.

15. The Fund continues indefinitely unless terminated under a clause of the Fund Rules. There is no intention to exercise this discretion in the future plans.

Other

16. The Fund will receive interest, dividend and non-share dividend income from companies who are residents of Australia for tax purposes.

17. An amount paid to the Fund or set aside for the Fund has not been and cannot be deducted under the ITAA 1997.

18. A tax offset has not been allowed nor would be allowable for any amount paid to the Fund or set aside for the Fund.

19. The Fund is not a resident of Australia for tax purposes.

20. All income arising from the investment activities of the Fund is exempt from income tax in Country A.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1936 paragraph 128A(3)

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

Income Tax Assessment Act 1936 section 128D

Income Tax Assessment Act 1997 section 118-520

Income Tax Assessment Act 1997 paragraph 275-20(4)(c)

Income Tax Assessment Act 1997 subsection 295-95(2)

Income Tax Assessment Act 1997 subsection 995-1(1)

Superannuation Industry (Supervision) Act 1993 section 10

Superannuation Industry (Supervision) Act 1993 section 62

Reasons for decision

Question 1

Is the Fund exempt from liability to withholding tax on interest, dividend and non-share dividend income under paragraph 128B(3)(jb) of the ITAA 1936?

Answer

Yes.

Detailed reasoning

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) as well as 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;

The Fund is a non-resident

The Fund is not a resident of Australia for tax purposes. Therefore, the Fund will satisfy this requirement.

The Fund is a superannuation fund for foreign residents

Superannuation fund for foreign residents is a defined term in the ITAA 1936. Section 6 of the ITAA 1936 states:

superannuation fund for foreign residents has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997.

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

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 the Fund 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:

● the Fund is an indefinitely continuing fund

● the Fund is a provident, benefit, superannuation or retirement fund

● the Fund was established in a foreign country

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

● The central management and control of the Fund is carried on outside of Australia by entities none of whom are Australian residents

● 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 offsets have been allowed or would be allowable for an amount paid to the Fund or set aside for the Fund.

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 23 October 2017, 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

A clause of the Fund Rules provides that the Company may terminate the scheme by written notice to the Trustees. Despite this, there is no intention to exercise this discretion in the future which means the Fund will continue for an indefinite time.

While the Fund is closed to new members, this does not prevent the Fund from being considered an indefinitely continuing fund as it will still continue for an undefined amount of time to provide pension benefits to deferred and retired members.

Therefore, it is accepted that the Fund will continue to operate in accordance with the Fund Rules for an indefinite period of time.

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

In Scott v. FCT (No. 2) (1966) 40 ALJR 265; 14 ATD 333, Windeyer J stated (40 ALJR 265 at 278; 14 ATD 333 at 351):

There is no definition in the Act of a superannuation fund. The meaning of the term must therefore depend upon ordinary usage, the attributes of a thing thus denominated being those which things ordinarily so described have...the connotation of the phrase in the Act must be determined by one’s general knowledge of the extent of the denotation of the phrase in common parlance...I have come to the conclusion that there is no single attribute of a superannuation fund established for the benefit of employees except that it must be a fund bona fide devoted as its sole purpose to providing for employees who are participants money benefits (or benefits having a monetary value) upon their reaching a prescribed age.

In Mahony v Commissioner of Taxation (1967) 41 ALJR 232; (1967) 14 ATD 519, Kitto J stated:

There was no definition in the Act of ‘a provident, benefit or superannuation fund’, and the meaning of the several expressions must therefore be arrived at in light of ordinary usage and with only one piece of assistance to be gathered from the immediate context. Since a fund, if its income was to be exempt under the provision, was separately required to be one established for the benefit of employees, each of the three descriptive words ‘provident’, ‘benefit’ and ‘superannuation’ must be taken to have connoted a purpose narrower than the purpose of conferring benefits, in a completely general sense, upon employees. 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.

In Cameron Brae Pty Limited v FCT (2007) 161 FCR 468; [2007] FCAFC 135; 2007 ATC 4936, the Full Federal Court held that the relevant fund was a superannuation fund for the purposes of former section 82AAE of the ITAA 1936. Jessup J at [106] stated:

In answering the question whether the fund was a “superannuation fund” as the term is ordinarily understood, it is, in my view, critical that payments could not have been made out of the fund (other than by way of administration expenses, taxation, etc) save to members of the relevant discretionary class, and save in circumstances which fell within the ordinary understanding of superannuation. A proper characterisation of the fund should, in my view, depend upon the purposes for which the assets and moneys of the fund might have been used rather than upon the quality of the rights of individual members of the fund. If the fund could have been used only to achieve what might be described as a superannuation purpose, I would describe the fund as a “superannuation fund”. That a particular member of a discretionary class might not, ultimately, have received any payment, was not, in my view, disqualifying.

ATO Interpretative Decision ATO ID 2009/67 Income Tax: Superannuation fund for foreign residents (ATO ID 2009/67) refers to these authorities to provide 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 establish 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). If a fund provides benefits in other circumstances, it will not satisfy the requirement to be a provident, benefit, superannuation or retirement fund.

The purpose of the Fund is to provide retirement, death, disability and related benefits for the employees and former employees of the Company or another participating employer. The Fund attempts to achieve this purpose by making investments to make payments available for the benefit of members at a later date.

A clause of the Fund Rules sets out the rules for the Trustees to invest assets of the Fund. These include acquiring and disposing of property, entering into contracts, lending or borrowing money, forming companies, carrying on a business, insuring assets and making other investments. These investments and expenditure are consistent with the character of a superannuation or retirement fund investing funds for the provision of retirement benefits and payments to members.

The circumstances in which a member of the Fund can receive the funds as provided for in the Fund Rules are consistent with those of a provident, benefit, superannuation or retirement fund.

The alternate circumstances of access, being early release of pension entitlements, as identified by the Fund Rules, align to the contemplated contingencies of a provident, benefit, superannuation or retirement fund.

As both the objective of the fund and the actual operation of the fund have the purpose of providing retirement benefits or benefits in alignment with other contemplated contingencies, the Fund is considered to be a provident, benefit, superannuation or retirement fund.

Therefore, the Fund will satisfy this requirement.

The Fund was established in a foreign country

The Fund was established in Country A. Therefore, the Fund will satisfy this requirement.

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

The Fund was established in Country A for the staff of the Company or another participating employer.

It is considered that the possibility of a very small number of members being returned residents or becoming Australian residents after ceasing eligible employment is incidental and should not be taken to conclude that the Fund, in this case, has not been established and is not maintained only to provide benefits for non-residents, based on the rules and operation of the Fund.

Therefore, the Fund will satisfy 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 in respect of the central management and control (CM&C) of a superannuation fund:

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, paragraph 6 of the Draft Taxation Ruling TR 2017/D2 Income tax: Foreign Incorporated Companies: Central Management and Control test of residency (TR 2017/D2) states:

Central management and control is the control and direction of a company's operations. The key element 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.

The registered office of the Fund is Country A. The decision making and management of the Fund is delegated to internal staff and a number of external investment managers and overseen by the Board of Trustee Directors. The members of the board are generally residents of Country A and no board member is a resident of Australia.

The objective of the Fund is to provide pensions and benefits to employees and former employees of the Company or another participating employer.

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

Therefore, the Fund will satisfy 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

An amount paid to the Fund or set aside for the Fund has not been and cannot be deducted under the ITAA 1997. A tax offset has not been allowed nor would be allowable for any amount paid to the Fund or set aside for the Fund.

Therefore, the Fund will satisfy this requirement.

Consists of interest and/or dividends and/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.

Subsection 128A(3) of the ITAA 1936 is also relevant. It states:

For the purposes of this Division, a beneficiary who is presently entitled to a dividend, to interest or to a royalty included in the income of a trust estate shall be deemed to have derived income consisting of that dividend, interest or royalty at the time when he or she became so entitled.

The operation of subsection 128A(3) of the ITAA 1936 will enable interest, dividend and non-share dividend income paid by an Australian resident company and derived by a trust estate to retain its character in the hands of a beneficiary of that trust estate. Further, the beneficiary will be deemed to have derived the relevant income for the purposes of paragraph 128B(3)(jb) of the ITAA 1936 at the point in time that the beneficiary becomes presently entitled to that income.

The Fund will receive interest income, along with dividend and non-share dividend income from companies who are residents of Australia for tax purposes.

Therefore, the Fund will satisfy this requirement.

Is exempt from income tax in the country in which the non-resident resides

All income arising from the investment activities of the Fund is exempt from income tax in Country A.

Therefore, the Fund will satisfy this requirement.

Conclusion

As all the requirements of paragraph 128B(3)(jb) of the ITAA 1936 are satisfied, the Fund will be entitled to an exemption under paragraph 128B(3)(jb) of the ITAA 1936.

Question 2

Is interest, dividend and non-share dividend income derived by the Fund not assessable and not exempt income of the Fund under section 128D of the ITAA 1936?

Answer

Yes.

Detailed reasoning

Section 128D of the ITAA 1936 provides:

Income other than income to which section 128B applies by virtue of subsection (2A), (2C) or (9C) of that section upon which withholding tax is payable, or upon which withholding tax would, but for paragraph 128B(3)(ga),(jb) or (m), section 128F, section 128FA or section 128GB, be payable, is not assessable income and is not exempt income of a person.

Section 128D of the ITAA 1936 provides that, inter alia, where withholding tax would be payable but for the operation of paragraph 128B(3)(jb) of the ITAA 1936, the income is not assessable income and is not exempt income.

The interest, dividend and non-share dividend income derived by the Fund from its Australian investments will not be assessable income or exempt income under section 128D of the ITAA 1936 because the aforementioned income:

● would have been subject to withholding tax, and

● is not exempt from withholding tax under any provision other than paragraph 128B(3)(jb) of the ITAA 1936.

Conclusion

The interest, dividend and non-share dividend income derived in Australia by the Fund is not assessable and not exempt income of the Fund under section 128D of the ITAA1936.

Question 3

Is the Fund a ‘foreign superannuation fund’ for the purposes of paragraph 275-20(4)(c) of the ITAA 1997?

Answer

Yes.

Detailed Reasoning

Section 275-20 of the ITAA 1997 sets out the widely-held requirements for managed investment trusts. Specifically, paragraph 275-20(4)(c) of the ITAA 1997 states that subsection 275-20(4) of the ITAA 1997 will cover:

a complying superannuation fund, a complying approved deposit fund or a foreign superannuation fund, being a fund that has at least 50 members

The Fund has over 50 members, and consequently will have at least 50 members as required by the latter part of paragraph 275-20(4)(c) of the ITAA 1997. It is therefore required to consider whether the Fund is a ‘foreign superannuation fund’.

Foreign superannuation fund

The term ‘foreign superannuation fund’ is defined in subsection 995-1(1) of the ITAA 1997 as:

foreign superannuation fund:

(a) a superannuation fund is a foreign superannuation fund at a time if the fund is not an Australian superannuation fund at that time; and

(b) a superannuation fund is a foreign superannuation fund for an income year if the fund is not an Australian superannuation fund for the income year.

This definition contains two further defined terms: ‘Australian superannuation fund’ and ‘superannuation fund’.

Australian superannuation fund

The term ‘Australian superannuation fund’ is defined in subsection 995-1(1) of the ITAA 1997 as:

Australian superannuation fund has the meaning given by section 295-95.

Subsection 295-95(2) of the ITAA 1997 states:

A * superannuation fund is an Australian superannuation fund at a time, and for the income year in which that time occurs, if:

(a) the fund was established in Australia, or any asset of the fund is situated in Australia at that time; and

(b) at that time, the central management and control of the fund is ordinarily in Australia; and

(c) at that time either the fund had no member covered by subsection (3) (an active member) or at least 50% of:

(i) the total * market value of the fund's assets attributable to * superannuation interests held by active members; or

(ii) the sum of the amounts that would be payable to or in respect of active members if they voluntarily ceased to be members;

is attributable to superannuation interests held by active members who are Australian residents.

As all of the conditions in subsection 295-95(2) of the ITAA 1997 must be met for a superannuation fund to be an Australian superannuation fund, the Fund only needs to fail one condition in order to not be an Australian superannuation fund.

The Fund was not established in Australia, but it is not disputed that the Fund holds assets situated in Australia. Paragraph 295-95(2)(a) of the ITAA 1997 is satisfied.

In relation to paragraph 295-95(2)(b) of the ITAA 1997, the central management and control of the fund must ordinarily be in Australia.

As considered in the Reasons for Decision for Question 1 of this Ruling, the central management and control of the Fund occurs in Country A by entities that are not Australian residents. This is because the registered office of the Fund is Country A. The decision making and management of the Fund is delegated to internal staff and a number of external investment managers and overseen by the Board of Trustee Directors. The members of the board are generally residents of Country A and no board member is a resident of Australia. Also, the objective of the Fund is to provide pensions and benefits to employees and former employees of the Company or another participating employer.

The Fund has no presence in Australia in respect of their decision making or direction. Consequently, the central management and control of the Fund is not ordinarily in Australia and cannot satisfy paragraph 295-95(2)(b) of the ITAA 1997.

As the Fund does not satisfy paragraph 295-95(2)(b) of the ITAA 1997, it cannot be an ‘Australian superannuation fund’.

Superannuation fund

To qualify as a ‘foreign superannuation fund’, the Fund must be a ‘superannuation fund’.

The term ‘superannuation fund’ is defined in subsection 995-1(1) of the ITAA 1997:

superannuation fund has the meaning given by section 10 of the Superannuation Industry (Supervision) Act 1993.

Section 10 of the Superannuation Industry (Supervision) Act 1993 (SIS Act) contains the following definition:

superannuation fund means:

(a) a fund that:

(i) is an indefinitely continuing fund; and

(ii) is a provident, benefit, superannuation or retirement fund; or

(b) a public sector superannuation scheme.

For the Fund to meet this definition, it needs to satisfy the three following criteria:

1) Is the Fund a fund?

2) Is the Fund an indefinitely continuing fund?

3) Is the Fund a provident, benefit, superannuation or retirement fund?

Is the Fund a fund?

There is no definition of ‘fund’ in the income tax legislation or the superannuation legislation. However, in Scott v. FCT (No. 2) (1966) 40 ALJR 265; 14 ATD 333, Windeyer J expressed the view that 'fund', in the context of 'superannuation fund', ordinarily meant 'money (or investments) set aside and invested, the surplus income there from being capitalized'.

A similar view was taken by Owen J in Mahoney v FCT (1965) 13 ATD 519 at 525:

In order to succeed the appellants must in the first place show that a fund was established. That, it seems to me, they have done by producing the deed of trust and proving that £500 was paid by the Company to the trustees to be dealt with by them in accordance with the trusts declared in the deed.

In relation to the Fund, contributions were made by the relevant member’s employer. The contributions are then invested with any gains being credited to the account of the Fund. Therefore, the Fund is a ‘fund’ for the purposes of section 10 of the SIS Act.

Is the Fund an indefinitely continuing fund?

The same reasoning as provided to define ‘indefinitely continuing’ in the Reasons for Decision for Question 1 of this Ruling will apply in relation to determining whether the Fund is ‘indefinitely continuing’ for the purposes of the definition of a ‘superannuation fund’ in section 10 of the SIS Act.

As explained in the Reasons for Decision for Question 1 of this Ruling, it is accepted that the Fund will continue to operate in accordance with the Fund Rules for an indefinite period of time. Therefore, the Fund is an indefinitely continuing fund for the purposes of the definition of a ‘superannuation fund’ in section 10 of the SIS Act.

Is the Fund a provident, benefit, superannuation or retirement fund?

The Fund is required to be a provident, benefit, superannuation or retirement fund. This requirement goes to the purpose and operation of the Fund. In addition to the explanation in the Reasons for Decision for Question 1 of this Ruling, there are some further differences to note in determining whether the Fund meets the definition of ‘provident, benefit, superannuation or retirement fund’ for the purposes of the definition of a ‘superannuation fund’ in section 10 of the SIS Act.

While ATO ID 2009/67 was concerned with the phrase ‘superannuation fund for foreign residents’ as defined in section 118-520 of the ITAA 1997, that phrase relies on the same definition of ‘superannuation fund’ as is used in defining a ‘foreign superannuation fund’.

Furthermore, section 62 of the SIS Act, which only applies to regulated superannuation funds as defined in section 19 of the SIS Act, provides that such a fund must be maintained solely for the core purposes of the provision of benefits to members upon retirement, the attainment of a prescribed age or death.

While the Fund is not a regulated superannuation fund, section 62 of the SIS Act is indicative of the constraints that apply to a ‘provident, benefit, superannuation or retirement fund’.

ATO ID 2009/67 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). If a fund can provide benefits in other circumstances, it will not qualify as a provident, benefit, superannuation or retirement fund.

The Fund rules governing the Fund prescribe the circumstances in which benefits can be paid to members or their family members. The Fund does not have circumstances that would preclude it from being considered to meet the sole purpose test and will therefore qualify as a provident, benefit, superannuation or retirement fund.

Therefore, the Fund is considered a ‘superannuation fund’ as it is an indefinitely continuing fund and is a provident, benefit, superannuation or retirement fund.

Conclusion

The Fund is a ‘foreign superannuation fund’ for the purposes of paragraph 275-20(4)(c) of the ITAA 1997 because it is a ‘superannuation fund’ but is not an ‘Australian superannuation fund’ under subsection 295-95(2) of the ITAA 1997.