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Edited version of your written advice
Authorisation Number: 1012926113971
Date of advice: 21 December 2015
Ruling
Subject: Lump sum payment from a foreign superannuation scheme
Question
Does Australia have taxing rights on the lump sum payment made from a superannuation scheme in a foreign country?
Answer
No.
This ruling applies for the following period:
Year ending 30 June 2016
The scheme commences on:
1 July 2015
Relevant facts and circumstances
You are a resident of Australia for taxation purposes.
You are a member of a superannuation scheme in a foreign country.
You will receive a lump sum payment from a superannuation scheme in a foreign country.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
Income Tax Assessment Act 1997 Subsection 6-10(2)
Income Tax Assessment Act 1997 Section 10-5
Income Tax Assessment Act 1997 Section 305-70
International Tax Agreements Act 1953 Section 4
International Tax Agreements Act 1953 Section 5
Reasons for decision
Summary
The assessability of the anticipated lump sum payment is covered by a double tax agreement between Australia and that foreign country.
Detailed reasoning
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
Assessable income consists of ordinary income and statutory income provided it is neither exempt nor non-assessable non-exempt income.
Subsection 6-10(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that an amount is statutory income if it is not ordinary income but is included in assessable income by another provision.
Section 10-5 of the ITAA 1997 lists the provisions about assessable income. Included in this list is section 305-70 of the ITAA 1997, which deals with lump sum payments received more than six months after Australian residency.
In determining your liability to pay tax in Australia it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreements.
Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations).
Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. There is a relevant agreement between Australia and the foreign country in which you are a member of a superannuation scheme.
The agreement operates to avoid the double taxation of income received by residents of Australia and the foreign country.
Under the relevant provisions of the double tax agreement between Australia and that foreign country, your lump sum payment from the superannuation scheme will only be taxed in that foreign country.
As the payment is not taxed in Australia, no Foreign Income Tax Offset is available.
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