Edited version of private advice

Authorisation Number: 1051903271342

Date of advice: 29 September 2021

Ruling

Subject: Superannuation fund for foreign residents - withholding tax exemption

Question 1

Is the Fund excluded from liability to withholding tax on its interest, dividend and non-share dividend income derived in respect of its Australian investments in Aus Co that were acquired on or before 27 March 2018, under paragraph 128B(3)(jb) of the Income Tax Assessment Act 1936 (ITAA 1936) due to the operation of Schedule 3 to the Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Act 2019 (Amendment Act)?

Answer

Yes.

Question 2

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

Answer

Yes.

This ruling applies for the following periods:

1 July 20XX to 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Background

The Fund is a retirement fund established outside of Australia.

The Fund is run by Entity A.

The Fund was established for the benefit of current and former employees (Members) of the Principal Employer as well other associated companies (Employers).

The Fund is made up of different sections and a Member's pension depends upon what section they belong to (Relevant Section).

The Fund was approved by the Tax Authority in its country of residence as a retirement benefits scheme.

The Fund is regulated by legislation and the Regulation Authority in its country of residence and is governed by the Fund Rules and other internal policies.

Investment Strategy

All of the Fund's investments are managed by various investment managers, annuity providers and additional voluntary contribution providers.

The Fund invests in a variety of financial assets including equities, corporate bonds, index linked bonds and infrastructure debt.

Eligibility

The Fund was established and is maintained and applied for the purpose of providing benefits for persons who are not residents of Australia.

In general, all employees who are employed by an Employer will be eligible to become a Member of the Fund.

Member Benefits

The Fund provides a range of core benefits for Members and their family, including:

•      a pension for life once the Member retires

•      the option to take a tax-free lump-sum at retirement

•      benefits for a Member's dependents when the Member dies, and

•      benefits where a Member is incapacitated or suffers ill-health.

Pension arrangements

The Fund Rules provide that a Member shall be entitled to an annual pension payable upon retirement.

Lump-sum benefits

Under the Fund Rules, when a Member retires, they can take part of their pension account as a tax-free lump sum (currently capped by legislation in its country of residence). The amount remaining in the pension account is then used to purchase an annual income for life for the Member and, if they wish, the Member's family.

Benefits upon death of a Member

The Fund Rules outline the benefits offered upon the death of a Member and include payments to a deceased Member's dependants.

Benefits where a Member becomes incapacitated or suffers ill-health

Under the Fund Rules, Entity A may commute a pension to a lump sum payment at the time a pension first becomes payable to a Member if such lump sum qualifies as a serious ill-health lump sum (in accordance with the legislation in its country of residence).

Where a Member becomes incapacitated by reason of mental disorder or otherwise, the Fund Rules provide that Entity A may pay or apply the amount to the benefit of the Member and/or their Dependants.

The Fund Rules, which contain the overriding benefit provisions, provides that a Member can access their retirement benefits earlier than their 55^th birthday on the grounds of incapacity.

Access to benefits

The normal retirement date under the Funds depends on their Relevant Section, but is generally somewhere between a Member's 60^th and 65^th birthday. However, the Member may be able to retire before their normal retirement date, or defer taking the retirement benefits until a later date, with the consent of Entity A and/or their Employer.

In accordance with legislation in the Fund's country of residence, the earliest that a Member can start to receive their pension, subject to ill-health conditions under the Fund, is their 55^th birthday. If a Member decides to retire early, their pension will be adjusted according to the Fund Rules.

The Fund Rules provide that a Member may transfer the value of their Fund benefits to another pension scheme such as the Member's current employer's fund or a personal pension subject to the consent of Entity A and the new fund accepting the transfer.

Members may not borrow against, sell, give-away or in any other way dispose of Fund benefits except for as covered by the Fund Rules, which includes where a court issues a pension sharing order on divorce or dissolution of a registered civil ceremony.

Termination

The Fund is an indefinitely continuing fund; however, the Fund Rules provides that the Fund will be wound up under certain circumstances.

Entity A advised via letter to the Commissioner dated XX that it does not have any intention to wind up or terminate the Fund.

Tax status

The Fund is exempt from tax in its country of residence.

No amounts that have been paid to the Fund or set aside to be paid to the Fund can be deducted under the ITAA 1936 or the Income Tax Assessment Act 1997 (ITAA 1997). Further, no amounts have been paid to the Fund or set aside to be paid to the Fund, for which a tax offset has been allowed, or would be allowable, under the ITAA 1936 or the ITAA 1997.

Australian Investments

The Fund has equity investments in Aus Co, being an Australian company listed on the Australian Securities Exchange (ASX).

As at XX date, the Fund owned XX shares in Aus Co. The total percentage owned as that date was less than 1%.

The Fund first acquired shares in Aus Co on XX date, being a date prior to 27 March 2018. The total number of shares originally acquired was XX, which amounted to total percentage ownership of less than 1%.

The income derived by the Fund includes interest and dividends paid by Aus Co.

The Aus Co Investments have the following characteristics:

•         all investments are listed on the ASX

•         the equity investments are interests in common stock, stapled securities and Real Estate Investment Trusts from which dividend, non-share dividend and interest income will be derived

•         the Fund holds less than 10% of the total interests on issue in Aus Co

•         the Fund has no involvement in the day-to-day management of the business of Aus Co

•         the Fund does not have the right to appoint a director to the Board of Directors of Aus Co

•         the Fund does not have the right to representation on any investor representative or advisory committees (or similar) of Aus Co

•         the Fund has no ability to direct or influence the operation of Aus Co outside of the ordinary rights conferred by the equity interest held, and

•         the Fund only holds rights to vote in proportion to its equity interest in Aus Co.

Other relevant facts

The Fund was established in a country outside Australia

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 under any provision of the ITAA 1997.

The interest and dividend income is exempt from income tax in the country in which the Fund is a resident and a tax offset has not been allowed or would be allowable for such an amount, and

The income of the Fund is not non-assessable non-exempt income because of subdivision 880-C of the ITAA 1997.

Relevant legislative provisions

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

Reasons for decision

Question 1

Is the Fund excluded from liability to withholding tax on its interest, dividend and non-share dividend income derived in respect of its Australian investments in Aus Co that were acquired on or before 27 March 2018, under paragraph 128B(3)(jb) of the ITAA 1936 due to the operation of Schedule 3 to the Amendment Act?

Summary

The requirements of paragraph 128B(3)(jb) of the ITAA 1936 are satisfied. The Fund is excluded from liability to withholding tax on its interest, dividend and non-share dividend income derived in respect of its Australian investments in Aus Co that were acquired on or before 27 March 2018 due to the operation of Part 2 of Schedule 3 to the Amendment Act.

Detailed reasoning

Broadly, paragraph 128B(3)(jb) of the ITAA 1936 provides an exclusion from withholding tax for interest, dividends and non-share dividends derived by a superannuation fund for foreign residents (subject to the satisfaction of certain conditions).

For the exclusion to apply, the interest, dividend and/or non-share dividend income must be:

•         derived by a non-resident that is a superannuation fund for foreign residents (as defined in section 118-520 of the ITAA 1997), and

•         exempt from income tax in the country in which the superannuation fund for foreign residents arise.

Except where the transitional rules in Schedule 3 to the Amendment Act apply, from 1 July 2019, the extra requirements in subsection 128B(3CA) of the ITAA 1936 must also be met.

Schedule 3 of the Amendment Act amended the ITAA 1936 to improve the integrity of the income tax law to limit access to tax concession for foreign investors. For superannuation funds for foreign residents, this was achieved by limiting the withholding tax exemption to interest, dividend and non-share dividend income derived from an entity in which the superannuation fund has a portfolio-like interest.

The amendments to limit the withholding tax exemption apply to income that is derived by a superannuation fund on or after 1 July 2019. However, a seven year transitional rule applies to assets acquired by a superannuation fund for foreign residents on or before 27 March 2018, subject to the satisfaction of certain requirements. In these circumstances, the amendments apply to income derived by a superannuation fund in respect of such an asset on or after 1 July 2026.

Paragraph 128B(3)(jb) of the ITAA 1936

The term 'superannuation fund for foreign residents' is defined in section 118-520 of the ITAA 1997 as follows:

Meaning of superannuation fund for foreign residents

(1)       A fund is a superannuation fund for foreign residents at a time if:

(a)    at the 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 deducted under this Act; or

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

Consequently, for the Fund to be excluded from withholding tax on interest and dividend income that it derives from investments into Australia under paragraph 128B(3)(jb) of the ITAA 1936, it must be established that the Fund:

1. is an indefinitely continuing fund;
2. is a provident, benefit, superannuation or retirement fund;
3. was established in a foreign country;
4. was established and maintained only to provide benefits for individuals who are not Australian residents;
5. has its central management and control carried on outside of Australia by entities none of whom are Australian residents;
6. does not receive or have amounts set aside for it that have been or can be deducted under the ITAA 1936 or the ITAA 1997;
7. does not receive or have amounts set aside for it that give rise to a tax offset;
8. receives income that consists of interest, or consists of dividends or non-share dividends paid by a company that is an Australian resident; and
9. is exempt from income tax in the country in which the non-resident resides.

i.       An indefinitely continuing fund

The Fund provides pensions to Members, who are employees of the Principal Employer or associated Employers, for their retirement. The Fund is therefore a 'fund' within the ordinary meaning of the term.

Entity A advised the Fund is an indefinitely continuing fund and there is no rule in the Fund Rules which requires the Fund to be terminated or wound up after a specified period. Rather, the Fund will only be terminated and wound up under the specific circumstances set out in the Fund Rules.

The Fund Rules provide sufficient evidence that the Fund will continue to operate for an indefinite period of time.

Therefore, this requirement has therefore been satisfied.

ii.      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 1997 is not defined in either the ITAA 1936 or the ITAA 1997. The phrase, however, has been subject to judicial consideration.

ATO Interpretative Decision ATO ID 2009/67 Income Tax: Superannuation fund for foreign residents (ATO ID 2009/67) refers to these authorities and provides the following guidance on the meaning of the phrase:

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).

The relevant authorities therefore establish that in order for a fund to qualify as a 'provide, benefit, superannuation or retirement fund', it must have the sole purpose of providing retirement benefits or benefits in other contemplated contingencies (such as death, disability or serious illness).

The Fund Rules are consistent with those of a superannuation fund. The Fund receives contributions from its Members and Employers on behalf of employee Members, which is effectively set aside for investment and for the purpose of providing retirement benefits in accordance with the Fund Rules.

The Fund provides retirement benefits to its Members upon the satisfaction of eligibility requirements based upon their age and years of service which are paid upon and following retirement. The Fund also provides ill-health benefits and benefits to a Member's dependents upon the Member's death.

Whilst a Member can transfer the value of the Fund benefit to another pension scheme subject to Entity A's consent and the new fund accepting the transfer, a Member may not borrow against, sell, give-away or in any other way dispose of Fund benefits.

The alternative circumstances of access available to Members of the Fund to the funds align with the contemplated contingencies of a 'provident, benefit, superannuation or retirement fund' as outlined in the relevant judicial decisions and ATO ID 2009/67.

Therefore, the Fund satisfies this requirement.

iii.     Established in a foreign country

The Fund was established in the XX country.

Therefore, the Fund was established in a foreign country and this requirement is satisfied.

iv.     Was established and maintained only to provide benefits for individuals who are not Australian residents

The Fund was established and is maintained to provide benefits to the Members, who are or were employees of the Principal Employer and other associated Employers, all of whom are not Australian residents.

Therefore, the Fund satisfies this requirement.

v.      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 state:

What is the nature of CM&C of a superannuation fund?

20. The CM&C of a superannuation fund involves 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 as 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.

Entity A has advised that the central management and control of the Fund occurs outside of Australia by entities that are not Australian residents.

Therefore, the Fund satisfies this requirement.

vi.     Does not receive, or have amounts set aside for it, that have been or can be deducted under the ITAA 1936 or ITAA 1997

Entity A has advised that no amounts that have been paid to the Fund, or have been set aside to be paid to the Fund, have or can be deducted under the ITAA 1936 or ITAA 1997.

Therefore, the Fund satisfies this requirement.

vii.   Does not receive, or have amounts set aside for it, that give rise to a tax offset.

Entity A has advised that no amounts that have been paid to the Fund, or set aside to be paid to the Fund, for which a tax offset has been allowed, or would be allowable, under the ITAA 1936 or the ITAA 1997.

Therefore, the Fund satisfies this requirement.

viii.  Receives income that consists of interest, or consists of dividends or non-share dividends paid by a company that is an Australian resident

The Fund receives Australian sourced income in the form of interest and dividends from Australian ASX listed companies.

Therefore, the Fund satisfies this requirement.

ix.     Is exempt from income tax in the country in which it resides

The Fund is exempt from tax in its country of residence.

The Fund therefore satisfies this requirement.

Conclusion

As all of the above requirements are satisfied, the Fund meets the requirements of being a 'superannuation fund for foreign residents' as defined by section 118-520 of the ITAA 1997.

The Fund therefore meets the requirements of paragraph 128B(3)(jb) of the ITAA 1936.

Schedule 3 to the Amendment Act

Transitional relief is afforded under Schedule 3 of the Amendment Act where the following requirements are met:

Part 2 - Application provisions

3 Application

(1)  Subject to subitems (2) and (3), the amendments made by this Schedule apply in relation to income that is derived on or after 1 July 2019.

(2)  The amendments made by this Schedule apply to income that is derived by a superannuation fund on or after 1 July 2026 if:

(a)  the income was derived by the superannuation fund in respect of an asset; and

(b)  subsection 128A(3) of the Income Tax Assessment Act 1936 does not apply in relation to that income; and

(c)   the superannuation fund acquired the asset on or before 27 March 2018.

(3)  The amendments made by this Schedule apply to income that is derived by a superannuation fund on or after 1 July 2026 if:

(a)  because of the operation of subsection 128A(3) of the Income Tax Assessment Act 1936, a superannuation fund derived the income because it holds an interest in the trust estate; and

(b)  the superannuation fund started to hold that interest on or before 27 March 2018; and

(c)   the dividend, non-share dividend or interest that was included in the income of the trust estate as mentioned in that subsection was so included in respect of an asset; and

(d)  the trustee of the trust estate acquired the asset on or before 27 March 2018.

In order for the Fund to qualify for the transitional relief afforded by Schedule 3 to the Amendment Act, it must be established that the Fund:

              i.        derived income after 1 July 2019 in respect of an asset;

             ii.        subsection 128A(3) of the ITAA 1997 does not apply in relation to that income; and

           iii.        acquired the assets on or before 27 March 2018.

i.       Derived income after 1 July 2019 in respect of an asset

The Fund has derived income in connection with its Aus Co investments.

Therefore, the Fund satisfies this requirement.

ii.      Subsection 128A(3) of the ITAA 1936 does not apply to that income

Subsection 128A(3) of the ITAA 1936 states the following:

(3)  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.

Subsection 128A(3) applies in respect of income derived by a trust estate to which a beneficiary is presently entitled. The Fund owns the Aus CO investments directly and not in the capacity as a beneficiary of a trust estate. Therefore, subsection 128A(3) of the ITAA 1936 does not apply.

Therefore, the Fund satisfies this requirement.

iii.     Acquired the assets on or before 27 March 2018

The Fund started to hold the Aus Co investments before 27 March 2018.

Therefore, the Fund satisfies this requirement in respect of the Aus Co investments that were acquired on or before 27 March 2018.

Conclusion

As all of the above requirements are satisfied, the Fund qualifies for the transitional relief afforded by Schedule 3 to the Amendment Act.

Accordingly, the Fund is not required to meet the additional requirements contained in subsection 128B(3CA) of the ITAA 1936 in respect of the Aus Co investments that were acquired on or before 27 March 2018.

As a result, the Fund is excluded from liability to withholding tax on the dividend and non-share dividend income received from Aus Co, in connection with the Aus Co investments that were acquired on or before 27 March 2018.

Question 2

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

Summary

The Fund is excluded from liability to withholding tax on its interest, dividend and non-share dividend income derived from its Aus Co investments under paragraph 128B(3)(jb) of the ITAA 1936.

Detailed reasoning

As outlined above under Question 1, the Fund satisfies the requirements of paragraph 128B(3)(jb) of the ITAA 1936. However from 1 July 2019, due the operation of the Schedule 3 of the Amendment Act, in order to be excluded from liability to withholding tax under paragraph 128B(3)(jb) of the ITAA 1936, the additional requirements in subsection 128B(3CA) of the ITAA 1936 must also be met.

Relevantly:

i.              The Fund must satisfy the 'portfolio interest test' in relation to the test entity (subsection 128B(3CC) of the ITAA 1936)

ii.            The Fund must satisfy the 'influence test' (subsection 128B(3CD) of the ITAA 1936) in relation to the test entity, and

iii.           The income cannot otherwise be 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.

i.       The Fund satisfies the 'portfolio interest test' in relation to the test entity

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

(3CC) 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.

The Fund holds less than 10% of the total participation interests in Aus Co. Further, the Fund would hold less than 10% of the total participation interests in Aus Co in the circumstances detailed at paragraph 128B(3CC)(b) of the ITAA 1936.

The Fund therefore satisfies the 'portfolio interest test' in respect of its Aus Co investments.

ii.      The Fund satisfies the 'influence test' in relation to the test entity

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

(3CD) 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 other, 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 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 Aus Co's operations. This includes situations where the Fund is able to act in concert with others to determine the identity of a relevant decision-maker in Aus Co.

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

Law Companion Ruling LCR 2020/3 - The superannuation fund for foreign residents withholding tax exemption and sovereign immunity (LCR 2020/3) provides examples and guidance on the 'influence test' and states the following at paragraphs 11 to 13 with respect of sub-test 1:

11. Whether the relevant entity is able to determine the identity of (to settle or decide upon, to choose or appoint) one of those persons is a question of fact. The phrase 'able to' focuses on the relent entity's capacity or power. The sub-test is therefore not limited to situations where the entity has already determined, or intends to determine, the identity of one of the relevant decision makers. A right to determine will be sufficient for the requisite level of influence to exist.

12. The relevant entity will not be 'able to' determine, as a matter of fact, where it has irrevocably and unconditionally waived its rights by way of a legally enforceable agreement.

13. The sub-test also extends to situations where the relevant entity has the indirect capacity to determine the identity of one of the relevant decision makers. This may occur, for example, where the relevant entity controls another entity and that other entity holds the right to determine the decision-maker's identity.

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 directions, instructions or wishes of the Fund.

LCR 2020/3 provides the following guidance at paragraph 29 in respect of sub-test 2:

29. The three matters ('accustomed', 'obliged' or 'might reasonably be expected to') are not a composite phrase denoting a single test; they comprise different considerations each of which is sufficient to establish influence:

•         Whether a person is 'accustomed' to act in accordance with the directions, instructions or wishes of the relevant entity requires an analysis of past facts. This necessitates an examination of any discernible pattern of the person following the directions, instructions or wishes given by the relevant entity.

•         Whether a person is 'obliged' to act in accordance with the directions, instructions or wishes of the relevant entity depends upon a formal or informal obligation existing at the relevant time.

•         Whether a person 'might reasonably be expected' to act in accordance with the directions, instructions or wishes of the relevant entity requires a prediction as to future events and a consideration as to the objective likelihood of those future events occurring. This requires a consideration of all of the facts and circumstances impacting upon the relationship between the two parties.

The following are relevant in determining whether the Fund satisfies the 'influence test' in respect of Aus Co:

•         Neither the Fund, nor any related party, has any involvement in the day-to-day management of the business of Aus Co

•         Neither the Fund, nor any related party, has the right to appoint a director to the Board of Directors of Aus Co

•         Neither the Fund, nor any related party, hold the right to representation on any investor representative or advisory committees (or similar) of Aus Co

•         Neither the Fund, nor any related party, has the ability to direct or influence the operation of Aus Co outside of the ordinary rights conferred by the equity interest held, and

•         the Fund only holds rights to vote in proportion to its equity interest in Aus Co, which represents less than X% of ownership.

Based on the above, the Commissioner has determined that it is reasonable to conclude that the Fund does not have influence over Aus Co of the kind described in subsection 128B(3CD) of the ITAA 1936 as the Fund does not have capacity to influence (either directly or indirectly) the day-to-day operation of Aus Co.

In addition, it is reasonable for the Commissioner to conclude that the Fund does not have influence over Aus Co of the type set out in the examples of LCR 2020/3.

Therefore, the Fund satisfies this requirement.

iii.     the income derived by the Fund cannot otherwise be non-assessable none-exempt (NANE) income.

The income of the Fund is not non-assessable non-exempt income because of subdivision 880-C of the ITAA 1997.

Therefore, the Fund satisfies this requirement.

Conclusion

As all of the above requirements are satisfied, the Fund is excluded from withholding tax in relation to interest, dividend and non-share dividend income derived from its Aus Co Investments.