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    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 your fund receives a super lump sum directly from a foreign super fund, your member can choose to have some or all of the assessable part of the lump sum treated as assessable income of your fund.

    By doing so, your fund pays tax – on the assessable part of the lump sum – at the concessional fund tax rate of 15%, rather than the member paying tax at their marginal rate.

    Your member can make this choice:

    • up until the day they lodge their income tax return for the year of transfer or
    • the day they would have been required to lodge one if they don't need to lodge a tax return.

    This is the case unless the governing rules of your fund provide an earlier time.

    If your member makes this choice, they must complete and submit the approved form to you. Once the choice is made, it cannot be revoked or varied.

    Next step:

    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.

    End of example

    Who should complete the approved form (NAT 11724)?

    Your member should complete this form if all of the following apply:

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

    Next step:

    How is the assessable amount calculated?

    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. It is essentially the growth in the foreign super fund between the time your member becomes an Australian resident and when the lump sum is paid.

    Applicable fund earnings are calculated differently depending on whether your member was an Australian resident at all times during the period to which the lump sum relates. Your member can apply for a private ruling to determine their 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 your member becoming an Australian resident or within six months of their foreign employment being terminated.

    See also:

    If the amount on 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 your member has 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 do you treat the assessable amount of the transfer when you pay it to your member?

    In most cases when you make a payment to your member, 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.

    See also:

    Scenario 2 – transfer from a foreign super fund directly to your member

    What happens if the payment is made to your member, either directly or to a third party on their behalf?

    If the lump sum from the foreign super fund is paid directly to your member (or another person on their behalf) there is no impact on your fund. The assessable amount of the payment will be included in your member's assessable income and taxed at their marginal tax rate.

    Scenario 3 – transfer from one foreign super fund to another foreign super fund

    How are payments from one foreign super fund to another foreign super fund treated?

    When a payment is made from one foreign super fund to another foreign super fund, there will be no tax payable by your fund or by your member at the time of that payment. Tax is deferred until the benefit is eventually paid to your member or to an Australian super fund, or otherwise dealt with on your member's behalf (that is, the monies exit the foreign super environment).

    Where can I get more information?

    To learn more about the tax treatment of transfers from foreign super funds, call our information line on 13 10 20.

      Last modified: 28 Mar 2017QC 17661