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Is the fund excluded from liability to withholding tax on dividend income derived from its Australian investment(s) in accordance with paragraph 128B(3) (jb) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Yes. This private ruling applies for the following periods: 1 July 20XX to 30 June 20XX The scheme commences on: 1 July 20XX

1.            The Fund was established in a foreign country (Country X). 2.            The Fund was created to provide retirement and disability benefits for its members. 3.            The Fund provides retirement and pension benefits upon a member's retirement. 4.            The Fund also offers disability and death benefits, which are only accessible to members or their beneficiaries in the case of a death benefit, when specific criteria outlined in the pension rules are met. 5.            The Fund provides both disability and death benefits. These benefits are only accessible to members of the Fund or their beneficiaries in the case of a death benefit, when specific criteria outlined in the pension rules are met. 6.            The Fund is administered by a board (Board), whose members are not residents of Australia. Australian Investments 7.            The Fund derives dividend income paid by Australian resident companies. 8.            For the ruling period, the Fund's equity investments in Australian entities will have the characteristics as set out in paragraph 9 below. 9.            In respect of the Fund's investments in each entity:

a)            the Fund holds less than 10% of the total participation interests in each entity b)            the Fund holds less than 10% of the total participation interests in each entity in the circumstances detailed in paragraph 128B(3CC) (b) of the ITAA 1936, c)            the Fund holds no right to appoint a person to a board, committee or similar, either directly or indirectly, d)            the Fund does not hold any veto rights on security holder votes, and e)            the Fund does not hold any other influence potentially of a kind described in subsection 128B(3CD) of the ITAA 1936. Other relevant Facts/Information 10.         The Fund has confirmed that: a)            the Fund is an indefinitely continuing fund and a provident, benefit, superannuation, or retirement fund, b)            the Fund was established in a country other than Australia, c)            the Fund was established and is maintained only to provide benefits for individuals who are not Australian residents, d)            the Fund's central management and control is carried on outside of Australia by entities none of whom are Australian residents,

e)            no amount paid to/set aside for the Fund can be deducted under the Income Tax Assessment Act 1997 (ITAA 1997) or ITAA 1936, f)             no tax offsets would be allowable for an amount paid to the Fund or set aside for the Fund, and g)            the income of the Scheme is not non-assessable non-exempt (NANE) income of the Fund because of either: i.                Subdivision 880-C of the ITAA 1997, or ii.                Division 880 of the Income Tax (Transitional Provisions) Act 1997. 11.         The Fund is exempt from income tax in Country X. 12.         The Fund does not have a contemplated end date.

Income Tax Assessment Act 1936 subsection 6(1) Income Tax Assessment Act 1936 section 128B(3)(jb)(i)) Income Tax Assessment Act 1936 subsection 128B(3)(jb)(ii) Income Tax Assessment Act 1936 subsection 128B(3)(jb)(iii) Income Tax Assessment Act 1936 Paragraph 128B(3)(jb) Income Tax Assessment Act 1936 subsection 128B(1) Income Tax Assessment Act 1936 subsection 128B(2) Income Tax Assessment Act 1936 subsection 128B(3CA) Income Tax Assessment Act 1936 subsection 128B(3CB) Income Tax Assessment Act 1936 subsection 128B(3CC) Income Tax Assessment Act 1936 subsection 128B(3CD) Income Tax Assessment Act 1997 subsection 128B(3CE) Income Tax Assessment Act 1997 section 128B Income Tax Assessment Act 1997 section 118-520 Income Tax Assessment Act 1997 subdivision 880-C Income Tax Assessment Act 19

All legislative references are to the ITAA 1936 unless otherwise stated 13.         Section 128B of the ITAA 1936 imposes withholding tax on income derived by non-residents, including dividend income (subsection 128B (1)), interest income (subsection 128B (2)), and other income specified in that section. 14.         Subsection 128B (3) of the ITAA 1936 states that section 128B does not apply to certain prescribed categories of income. Specifically, paragraph 128B(3) (jb) exempts interest, dividends, and non-share dividends received by a superannuation fund for foreign residents from withholding tax, provided certain conditions are met. 15.         For the exclusion to apply, the interest, dividend, or non-share dividend income must: a.    be derived by a superannuation fund for foreign residents (as defined in section 118-520 of the ITAA 1997); and b.    be exempt from income tax in the country where the superannuation fund for foreign residents is established. 16.         From 1 July 2019, additional integrity requirements under subsection 128B(3CA) must also be satisfied.

17.         Under subparagraph 128B(3) (jb)(i), the exemption applies only to income that is derived by a non-resident that is a superannuation fund for foreign residents, as defined in section 118-520 of the ITAA 1997. The Fund is a non-resident 18.         Based on the facts and circumstances outlined above, the Fund is not a resident of Australia. 19.         Therefore, the Fund satisfies this requirement. The Fund is a superannuation fund for foreign residents 20.         The term "superannuation fund for foreign residents" is defined in the ITAA 1936 by reference to the ITAA 1997. 21.         Subsection 6(1) of the ITAA 1936 states that superannuation fund for foreign residents has the meaning given in subsection 995-1(1) of the ITAA 1997, which in turn refers to section 118-520. 22.         Section 118-520 of the ITAA 1997 provides that a fund is a superannuation fund for foreign residents at a particular time if: a.    It is an indefinitely continuing fund and a provident, benefit, superannuation, or retirement fund; b.    It was established in a foreign country;

c.    It was established and is maintained solely to provide benefits for individuals who are not Australian residents; d.    Its central management and control is carried on outside Australia by entities none of whom are Australian residents. 23.         Additionally, a fund will not qualify if: a.    Any amount paid to or set aside for the fund has been or can be deducted under the ITAA 1997; or b.    A tax offset has been allowed or is allowable for such an amount. 24.         Consequently, for a fund to be treated as a superannuation fund for foreign residents for the purposes of paragraph 128B(3) (jb) of the ITAA 1936, it must satisfy all of the following: a.    Be an indefinitely continuing provident, benefit, superannuation, or retirement fund; b.    Established in a foreign country; c.    Maintained solely for individuals who are not Australian residents; d.    Central management and control outside Australia by non-residents; e.    No deductible contributions or allowable tax offsets under the ITAA 1997. The Fund is an indefinitely continuing fund

25.         The Fund must be an indefinitely continuing fund. This term is not defined in either the ITAA 1936 or the ITAA 1997 and should therefore be interpreted according to its ordinary meaning, considering the legislative context and relevant case law. 26.         Dictionary Meaning: The Australian Oxford Dictionary (2004) defines fund as: I.              A permanent stock of something ready to be drawn upon. II.            A stock of money, especially one set apart for a purpose. 27.         In Scott v FC of T (No 2) (1966) 14 ATD 333; 10 AITR 290 , Windeyer J stated that a superannuation fund ordinarily means "money (or investments) set aside and invested, the surplus income therefrom being capitalised." This view was endorsed by Hill J in Walstern Pty Ltd v Commissioner of Taxation (2003) 138 FCR 1; 2003 ATC 5076; 54 ATR 423 , who emphasized the need for "money or other property" to constitute a fund. 28.         General Principle: An indefinitely continuing fund does not need to exist forever; rather, its governing rules should not specify an express termination date.

29.         The Fund was established in Country X to provide retirement benefits to its members and survivor benefits for their spouses and children. 30.         It has operated continuously since its establishment in 1946 and does not have a fixed termination date. Therefore, it is accepted that the Fund is indefinitely continuing, and this requirement is satisfied. The Fund is a provident, benefit, superannuation or retirement fund 31.         Under subparagraph 118-520(1)(a)(ii), the Fund must be a "provident, benefit, superannuation or retirement fund." These terms are not defined in either the ITAA 1936 or ITAA 1997, but their meaning has been clarified through judicial interpretation. 32.         In Scott v FC of T (No 2) (1966), the High Court examined the terms 'superannuation fund' and 'fund'. Justice Windeyer stated at ATD 351; AITR 312; ALJR 278 that:

"... 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 essential 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 this connexion "fund", I take it, ordinarily means money (or investments) set aside and invested, the surplus income there from being capitalised." 33.         In a later case, Mahoney v. Commissioner of Taxation (Cth) (1967) 41 ALJR 232; (1967); 14 ATD 519; 10 AITR 463 (Mahoney case), the High Court took a similar view as in Scott, Justice Kitto expressed the view at ALJR 232; (1967); ATD 520; AITR 464 that: "...

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 recognised 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 employee, 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 a general sense, but characterised by some specific future purpose."

34.         In Cameron Brae Pty Limited v Commissioner of Taxation [2007] FCAFC 135, the Full Federal Court held that the relevant fund was a superannuation fund for the purposes of former section 82AAE. 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."

35.         Judicial authorities have clarified that a provident, benefit, superannuation or retirement fund must have a sole purpose of providing benefits for specific future events rather than general welfare. In Scott v FC of T (1966), the High Court held that a superannuation fund is bona fide devoted to providing monetary benefits upon reaching a prescribed age, with Windeyer J noting that a fund ordinarily means "money (or investments) set aside and invested, the surplus income therefrom being capitalised." In Mahoney v FC of T (1967), Kitto J emphasized that the terms provident, benefit, and superannuation connote provision for retirement or against contemplated contingencies such as death or disability. The Full Federal Court in Cameron Brae Pty Ltd v FC of T (2007) confirmed that a fund qualifies as a superannuation fund if its assets can only be used for superannuation purposes, regardless of individual entitlements.

36.         Consistent with these cases, ATO Interpretative Decision ATO ID 2009/67 Income Tax: Superannuation fund for foreign residents, states that the fund's sole purpose must be to provide superannuation benefits, payable upon retirement, death, or other cessation of employment, or against contingencies such as disability or serious illness. Accordingly, benefits must be linked to a specific future purpose, and a provident fund refers to provision against contemplated contingencies, while a superannuation or retirement fund refers to provision for retirement or cessation of employment. 37.         It provides defined retirement benefits based on age and years of service, payable upon and following retirement. 38.         It also provides disability and death benefits where a member dies or becomes disabled before retirement. 39.         These alternate access circumstances, death and disability, align with the contemplated contingencies recognized by case law. 40.         The Fund satisfies the requirement of being a provident, benefit, superannuation or retirement fund. The Fund was established in a foreign country

41.         The Fund was established in a foreign country, being Country X. 42.         Therefore, the Fund satisfies this requirement. The Fund was established and maintained only to provide benefits for individuals who are not Australian residents 43.         Paragraphs 118-520(1)(b) and (c) of the ITAA 1997 require that the fund must have been established in a foreign country and must be established and maintained solely to provide benefits to individuals who are not Australian residents. 44.         The Fund was established and is being maintained exclusively to provide retirement benefits to members of Entity A, in Country X. 45.         While there is a remote possibility that a small number of members may become Australian residents after ceasing employment or retiring, this is considered incidental and does not alter the fact that the Fund was established and maintained only for non-residents. 46.         Accordingly, the Fund satisfies these requirements. The Fund's central management and control (CM&C) is carried on outside Australia by entities none of whom is an Australian resident 47.         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' (Taxation Ruling TR 2008/9) explain that the central management and control (CM&C) of a superannuation fund focuses on who, when, and where strategic and high-level decisions are made. These decisions include: •                     Formulating and reviewing the fund's investment strategy; •                     Monitoring investment performance and updating the strategy; •                     Managing reserves prudently; and •                     Deciding how assets are applied to fund member benefits. 48.         By contrast, day-to-day operational activities, such as accepting contributions, investing assets, performing administrative tasks, and paying benefits do not constitute CM&C because they are not strategic or high-level in nature. 49.         Taxation Ruling TR 2018/5 Income tax: central management and control test of residency

(TR 2018/5) further clarifies that CM&C refers to the control and direction of an entity's operations, not its physical location. It is characterized by high-level decisions that set general policies and determine the entity's operational direction and transactions. 50.         In this case, the Fund's CM&C is exercised by a Board, all of whom reside in Country X. the Board is responsible for the proper operation of the Fund and has authority over investment decisions. 51.         Based on these facts, the Fund's central management and control occurs outside Australia by entities that are not Australian residents. 52.         Therefore, the Fund 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 53.         Subsection 118-520(2) of the ITAA 1997 provides that a fund will not qualify as a superannuation fund for foreign residents if: a.            any amount paid to the fund or set aside for the fund has been or can be deducted under the Act; or b.            a tax offset has been allowed or is allowable for such an amount.

54.         In this case, no amount paid to the Fund or set aside for the Fund has been, or can be, deducted under the ITAA 1997. Likewise, no tax offset has been allowed or would be allowable for any amount contributed to the Fund. 55.         Therefore, the Fund satisfies this requirement. Subparagraph 128B(3)(jb)(ii) - the income that consists of interest, dividend or non-share dividend income are paid by a company that is a resident 56.         Subparagraph 128B(3)(jb)(ii) requires the superannuation fund for foreign residents to derive the interest, dividend or non-share dividends that are paid by the Australian resident companies. 57.         The Fund directly holds shares in Australian resident entities from which it derives dividend income. 58.         Therefore, the Fund satisfies this requirement. Subparagraph 128B(3)(jb)(iii) - the income is exempt from income tax in the country in which the non-resident resides 59.         The Fund is exempt from income tax in Country X. 60.         Therefore, the Fund satisfies this requirement. Conclusion in relation to paragraph 128B(3)(jb)

61.         The Fund satisfies all the conditions in paragraph 128B(3)(jb) of the ITAA 1936 for exemption from withholding tax. However, from 1 July 2019, additional integrity requirements under subsection 128B(3CA) must also be met for the exemption to apply. Treasury Laws Amendment 2019 62.         The Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Act 2019 introduced additional requirements for the withholding tax exemption under paragraph 128B(3)(jb), effective from 1 July 2019. These requirements apply only to income derived from assets acquired after 27 March 2018. 63.         Under subsection 128B(3CA), the following conditions must be met: a.            The superannuation fund for foreign residents must satisfy the portfolio interest test in subsection 128B(3CC) in relation to the test entity at specified times (paragraph 128B(3CA) (a)). b.            The fund must not, at the time the income is derived, have influence of a kind described in subsection 128B(3CD) over the test entity (paragraph 128B(3CA) (b)). c.             The income must not otherwise be non-assessable, non-exempt income because of:

i.                Subdivision 880-C of the ITAA 1997, or ii.                Division 880 of the Income Tax (Transitional Provisions) Act 1997 (paragraph 128B(3CA) (c)). The Fund satisfies the 'portfolio interest test' 64.         Under subsection 128B(3CC) of the ITAA 1936, a superannuation fund satisfies the portfolio interest test in relation to a test entity at a given time if: a.            the total participation interest (as defined in section 960-180 of the ITAA 1997) held by the fund in the test entity is less than 10%; and b.            it would remain less than 10% if, for the purposes of calculating direct participation interest: i.                an equity holder were treated as a shareholder; and ii.                amounts contributed for non-share equity interests were included in the company's paid-up share capital. 65.         The test entity is defined in subsection 128B(3CB) as either the entity paying the interest, dividends, or non-share dividends, or a resident trust estate if subsection 128A (3) applies.

66.         Section 960-180 of the ITAA 1997 provides that an entity's total participation interest is the sum of its direct participation interest and indirect participation interest. a.            A direct participation interest in a company is generally its direct control interest (section 350 of the ITAA 1936), which is the greatest percentage of paid-up share capital, voting rights, or rights to distributions of capital or profits held. b.            An indirect participation interest is calculated by multiplying the entity's interest in an intermediate entity by that entity's total participation interest in the test entity (section 960-185 of the ITAA 1997). 67.         Based on the facts, the Fund does not hold more than 10% of the total participation interest, including both direct and indirect interests, in any of the relevant Australian entities. Therefore: a.            The Fund's total participation interest is less than 10% at all relevant times (paragraph 128B(3CC) (a)); and b.            It would remain less than 10% under the adjustments specified in paragraph 128B(3CC) (b). 68.         The Fund satisfies the portfolio interest test for its Australian investments.

The Fund does not have influence of a kind described in subsection 128B(3CD) of the ITAA 1936 in relation to the test entity at the time the income was derived 69.         Under subsection 128B(3CD) of the ITAA 1936, a superannuation fund is considered to have influence over a test entity if either of the following conditions is met: A.            Sub-test 1 (paragraph 128B(3CD) (a)) The fund, either directly or indirectly, or acting in concert with others, can determine the identity of at least one person who makes (or is reasonably expected to make) decisions that control and direct the test entity's operations. This includes situations where the fund has the ability to approve or veto decisions affecting the entity's control or direction. Application to the Fund: i.              The Fund does not have the ability to appoint directors or members of advisory or investment committees, either alone or jointly with other investors. ii.             The Fund does not have veto rights over decisions relating to the control or direction of the test entity. B.            Sub-test 2 (paragraph 128B(3CD) (b))

At least one decision-maker 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 (whether directly or indirectly, or through acting in concert with others). Application to the Fund: a.            The Fund has no side letters or arrangements granting influence over the test entity. b.            Neither the Fund nor any related party: i.                Participates in day-to-day management of any Australian company or trust; ii.                Has rights to appoint directors or equivalent roles; iii.                Holds representation on investor committees; iv.                Has any ability to direct or influence operations beyond ordinary equity rights; v.                Has entered into any agreements conferring special rights; c.            Voting rights are limited to the Fund's proportional equity interest. 70.         The Fund does not have influence of a kind described in subsection 128B(3CD) in respect of its Australian investments. It lacks any capacity, direct or indirect to influence the control, direction, or day-to-day management of these entities.

71.         Accordingly, the Commissioner accepts that the Fund satisfies this requirement. The income received by the Fund is not non-assessable and non-exempt income of the Fund because of Subdivision 880-C of the ITAA 1997 or Division 880-C of the Income Tax (Transitional Provisions) Act 1997 72.         To qualify under paragraph 128B(3CA) (c) of the ITAA 1936 , the fund's income must not be non-assessable, non-exempt under Subdivision 880-C of the ITAA 1997 or Division 880 of the Income Tax (Transitional Provisions) Act 1997 , which relate to sovereign immunity. 73.         Sovereign immunity applies only to income derived by a sovereign entity, defined under section 880-15A of the ITAA 1997 as a body politic, foreign government agency, or a wholly owned entity of such bodies. As the Fund is not government-administered or owned by a sovereign entity, its income does not qualify for exemption under these provisions. 74.         The Fund therefore satisfies this condition in respect of its investments in the Australian entities. Conclusion

As the Fund has satisfied all the conditions under paragraph 128B(3)(jb) and the additional requirements in subsection 128B(3CA) in relation to its investments in Australian entities, it is entitled to an exemption from withholding tax on dividend income derived from those investments.