Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1012776136855

Ruling

Subject: Lump sum payment from a foreign superannuation fund.

Questions

Does section 305-60 of the Income Tax Assessment Act 1997 apply to the lump sum payment received from the Fund?

Advice/Answers

Yes.

This ruling applies for the following period

30 June 2015

The scheme commenced on

1 July 2014

Relevant facts and circumstances

You expect to receive a lump sum payment in the 2014-2015 income year.

You are still an overseas resident.

You have yet to become a resident of Australia which will be pursued upon your immediate arrival in the 2014-15 income year.

You plan to retire from your overseas employer.

You will receive a lump sum payment in the 2014-15 income year from an overseas scheme (the Scheme).

The Scheme is not accessible prior to retirement and funds were locked in until you turn age 55.

The superannuation lump sum payment you will receive from the Scheme will be received within 6 months after you become an Australian resident.

The superannuation lump sum it relates only to a period when you were not an Australian resident and it does not exceed the amount in the Scheme that was vested in you when you received the payment.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 295-95(2).

Income Tax Assessment Act 1997 Subdivision 305-B.

Income Tax Assessment Act 1997 Section 305-60.

Income Tax Assessment Act 1997 Subsection 995-1(1).

Reasons for decision

Summary

The lump sum payment from the Scheme will not be assessable income and is not exempt income.

Detailed Reasoning

Subdivision 305-B of the Income Tax Assessment Act 1997 (ITAA 1997) sets out the tax treatment of superannuation benefits from foreign superannuation funds.

Section 305-60 of the ITAA 1997 states:

A superannuation lump sum you receive from a foreign superannuation fund is not assessable income and is not exempt income if:

(a) you receive it within 6 months after you become an Australian resident; and

(b) it relates only to a period:

(c) it does not exceed the amount in the fund that was vested in you when you received the payment.

A foreign superannuation fund is defined in subsection 995-1(1) of the ITAA 1997 as follows:

(a) a superannuation fund is a foreign superannuation fund at a time if the fund is not an Australian superannuation fund at that time; and

(b) a superannuation fund is a foreign superannuation fund for an income year if the fund is not an Australian superannuation fund for the income year.

Subsection 295-95(2) of the ITAA 1997 defines Australian superannuation fund as follows:

A superannuation fund is an Australian superannuation fund at a time, and for the income year in which that time occurs, if:

(a) the fund was established in Australia, or any asset of the fund is situated in Australia at that time; and

(b) at that time, the central management and control of the fund is ordinarily in Australia; and

(c) at that time either the fund had no member covered by subsection (3) (an active member) or at least 50% of:

is attributable to superannuation interests held by active members who are Australian residents.

Thus, a superannuation fund that is established outside of Australia and has its central management and control outside of Australia would qualify as a 'foreign superannuation fund'. The fact that some of its members may be Australian residents would not necessarily alter this.

In the present case you will receive a lump sum payment from the Scheme in the 2014-15 income year. The Scheme is not accessible prior to retirement and funds were locked in until you turn age 55. As the Scheme is set up for the express purpose of providing for the payment of benefits in the nature of superannuation it meets the definition of superannuation fund. As the Scheme's central management and control is clearly not in Australia it is evident that the Fund is not an Australian superannuation fund as defined in subsection 295-95(2) of the ITAA 1997. Based on the information provided, the Commissioner considers that the Fund is a foreign superannuation fund as defined in subsection 995-1(1) of the ITAA 1997.

As noted earlier, you will receive a lump sum payment from the Scheme. You are currently still an overseas resident. You have yet to become a resident of Australia which will be pursued upon your immediate arrival in the 2014-15 income year.

The superannuation lump sum payment you will receive from the Scheme, a foreign superannuation fund will be received within 6 months after you become an Australian resident. Further, the superannuation lump sum it relates only to a period when you were not an Australian resident and it does not exceed the amount in the Scheme that was vested in you when you received the payment. Therefore, section 305-60 of the ITAA 1997 applies to the lump sum payment. The lump sum payment from the Scheme will not be assessable income and is not exempt income.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).