Tax treatment of transfers from foreign super funds

These questions and answers relate to the tax treatment of transfers from foreign super funds to Australian complying super funds.

Scenario 1 - transfer from a foreign super fund to an Australian super fund

If you have a superannuation lump sum from a foreign super fund transferred directly to an Australian super fund, you can choose to have all or part of the assessable part of the lump sum treated as assessable income of the Australian super fund.

By doing so, the Australian super fund pays the relevant tax on the assessable part of the lump sum at the concessional fund tax rate of 15%, rather than you paying tax at your marginal rate.

You can make this choice up until the day you lodge your income tax return for the year of transfer (or, if you don't need to lodge a tax return, the day you would have been required to lodge one). This is the case unless the governing rules of your Australian super fund provide an earlier time. If you make this choice, the approved form, Completing your choice to have your Australian fund pay tax on a foreign super transfer (NAT 11724), must be completed and submitted to your Australian fund. It is an essential part of making this choice. Once it is made, your choice cannot be revoked or varied.

Example

A taxpayer has $100,000 in a foreign super fund which is paid directly to an Australian super fund. Assume that the assessable amount of the payment is $20,000.

The taxpayer may choose to have the $20,000 treated as assessable income of the Australian super fund. In this situation, the taxpayer must complete the Choice to have your Australian fund pay tax on a foreign super transfer form (NAT 11724) and submit it to their super fund.

The Australian super fund will include the $20,000 in its assessable income and the amount to be included in the taxpayer's assessable income will be reduced to nil.

Who should complete the approved form (NAT 11724)?

You should complete this form if all of the following apply:

• you are an Australian resident transferring your entire entitlement in a foreign super fund to a complying Australian super fund
• you receive your super entitlement more than six months after becoming an Australian resident or terminating your foreign employment
• the entitlement being transferred includes earnings in the foreign fund, accumulated since you became an Australia resident, that would have been assessable in your Australian tax return (that is, you would have paid tax on that amount at your marginal tax rate)
• you want to have your Australian super fund pay income tax on some or all of these earnings instead (a super fund generally pays 15% tax).

For a copy of NAT 11724, refer to Completing your Choice to have your Australian fund pay tax on a foreign super transfer. You can also phone 13 10 20 to request a copy.

How do I calculate the assessable amount?

The assessable amount of a super lump sum from a foreign super fund transferred directly to an Australian super fund is referred to as applicable fund earnings and is essentially the growth in the foreign super fund between the time you become an Australian resident and when the lump sum is paid. How applicable fund earnings are calculated depends on whether you were an Australian resident at all times during the period to which the lump sum relates. You can apply for a private ruling to determine your applicable fund earnings.

For more information on applicable fund earnings, call the Super information line on 13 10 20.

A super lump sum from a foreign super fund will generally be tax-free if received within six months of you becoming an Australian resident or within six months of your foreign employment being terminated.

For more information, refer to Super lump sums from a foreign super fund.

If the amount in the form is treated as assessable income of the Australian super fund, how is the rest of the payment from the foreign super fund treated?

In most cases, if you have chosen for all the assessable amount of the transfer to be assessable income of the Australian super fund, the part of the payment not covered on the form will be tax free.

How is the assessable amount of the transfer treated when paid to you by the Australian super fund?

In most cases, the assessable amount of the transfer will be treated as a taxable component of a super lump sum benefit consisting of an element taxed in the fund when paid by an Australian super fund.

For more information, refer to Key factors that affect how your super payout is taxed.