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Edited version of private advice
Authorisation Number: 1052022323228
Date of advice: 19 September 2022
Ruling
Subject: Assessable income
Question
Is the payment of a lump sum death benefit paid to foreign residents assessable in Australia?
Answer
Yes.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The deceased was granted a skilled work visa to work in Australia several years ago.
The deceased became severely ill at the end of the following year and travelled overseas to receive medical treatment.
They were admitted to hospital a couple of months later but died shortly thereafter.
The deceased was a member of a superannuation fund and had a related life insurance policy.
The superannuation lump sum was paid to the deceased's parents.
Both of the payments had an amount withheld by the superannuation fund.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Reasons for decision
In determining the liability to tax on Australian sourced income received by a foreign resident of Country Z it is necessary to consider any applicable double tax agreement contained in the International Tax Agreements Act 1953.
The Double Tax Agreement (DTA) between Country Z and Australia does not contain any articles that specifically relate to the receipt of a superannuation lump sum death benefit, so Article XX which deals with income not expressly mentioned in the agreement will apply.
The Article provides that income of a resident of one of the countries which is not expressly mentioned in the other articles of the agreement will be taxable only in the country of residency. However, if such income is derived by a resident of one of the countries from sources in the other country, such income may also be taxed in the country in which the income has its source.
Therefore, the DTA allows both Country Z and Australia to tax the lumpsum death benefit.
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