ATO Interpretative Decision

ATO ID 2003/1188 (Withdrawn)

Income Tax

• This ATO ID is withdrawn because it contains a view in respect of provisions of the Income Tax Assessment Act 1936 that don't apply after the 2009-10 income year. Despite its withdrawal, this ATO ID continues to be a precedential view in respect of decisions for income years up to, and including the 2009-10 income year.
  This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions.
  Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series. The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Does section 529 of the Income Tax Assessment Act 1936 (ITAA 1936) apply to include an amount of attributable income in the assessable income of a taxpayer in relation to an interest in a United States of America (US) Savings and Investment Plan that is a non-resident employer-sponsored superannuation fund?

Decision

No. The US Savings and Investment Plan is a foreign trust, and is a foreign investment fund (FIF) for the purposes of the FIF rules in Part XI of the ITAA 1936. However, Division 11 of Part XI of the ITAA 1936 provides an exemption from the FIF rules where the FIF interest is in a non-resident employer-sponsored superannuation fund.

Facts

The Savings and Investment Plan is based in the US.

The Savings and Investment Plan is a non-resident superannuation fund established and maintained by the employer for the benefit of its employees.

The taxpayer is an individual and a resident of Australia for tax purposes.

The taxpayer is a former employee of the employer.

Reasons for Decision

Section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision.

The assessable income of an Australian resident includes statutory income from all sources (subsection 6-10(4) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists certain statutory amounts that form part of assessable income. Included in this list is section 529 of the ITAA 1936, which deals with foreign investment income.

Subsection 529(2) of the ITAA 1936 provides that if foreign investment fund income accrues to a taxpayer in respect of a notional accounting period of a FIF, then, for the income year in which the notional accounting period ended, the taxpayer's assessable income will include:

(a)

the whole of the foreign investment fund income amount (if the taxpayer is a resident throughout the whole of the notional accounting period), or

(b)

if the taxpayer was a resident throughout part or parts of the notional accounting period, an amount determined according to the formula set out in subsection 529(2) of the ITAA 1936.

Section 529 of the ITAA 1936 applies subject to section 485 of the ITAA 1936 which sets out when a taxpayer's interest in a FIF will be subject to taxation under the FIF rules. A FIF is a foreign company or foreign trust (subsection 481(1) of the ITAA 1936).

The US Savings and Investment Plan is a foreign trust because it is a trust that is not an Australian trust or a resident Part IX entity (subsection 481(3) and sections 473 and 477 of the ITAA 1936).

An interest in a FIF will be subject to the FIF measures for a notional accounting period that ends in the taxpayer's year of income if the taxpayer:

(a)

held the interest at the end of the year of income, and

(b)

was a resident at any time during that year of income (subsection 485(3) of the ITAA 1936).

Therefore, a taxpayer's interest in a foreign trust that is a FIF will be subject to attribution under Part XI of the ITAA 1936 unless one of the exemptions to the FIF rules applies.

Division 11 of Part XI of the ITAA 1936 provides an exemption for an interest in a non-resident employer-sponsored superannuation fund. To obtain this exemption, the following requirements must be met (sections 518 and 519 of the ITAA 1936):

•

the taxpayer must be a natural person

•

the taxpayer must be an employee or former employee of the employer, and

•

the FIF must be a superannuation fund maintained by the taxpayer's employer, or an associate of that employer, for the benefit of their employees.

The taxpayer is a natural person and a former employee of the employer. The US Savings and Investment Plan is a US-based employer-sponsored superannuation fund, established and maintained by the employer for the benefit of the employees of that employer. Therefore the taxpayer's interest in the fund satisfies the requirements for the exemption.

As the exemption applies to the taxpayer's interests in the US Savings and Investment Plan for the income year, no attributable income is included in the taxpayer's assessable income under section 529 of the ITAA 1936 for that year.

Year of income:  30 June 2003

Legislative References:
Income Tax Assessment Act 1936
   section 473
   section 477
   subsection 481(1)
   subsection 481(3)
   section 485
   subsection 485(3)
   section 518
   section 519
   section 529
   subsection 529(2)
   Part XI
   Part XI, Division 11

Other References:
Foreign Investment Funds guide NAT 2130-6.1998

Keywords
Double tax agreements
Foreign attributable income
Foreign investment
Foreign investment fund measures
Foreign investment funds
Foreign superannuation payments
United States

Business Line:  Public Groups and International

Date of publication:  24 December 2003

ISSN: 1445-2782