ATO Interpretative Decision

ATO ID 2001/24 (Withdrawn)

Income Tax

• This ATO Interpretative Decision is withdrawn from the database because it contains a view in respect of section 27CAA of the Income Tax Assessment Act 1936 which does not apply after the 2003 - 2004 income year. Despite its withdrawal from the database, this ATO Interpretative Decision continues to be a precedential view in respect of decisions for income years up to, and including, the 2003 - 2004 income year.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

What is the tax treatment of the payment from an eligible non-resident non-complying superannuation fund to the Australian resident; and can tax be deferred on the payment from the eligible non-resident non-complying superannuation fund if it is rolled over to another non-complying superannuation fund in a foreign country?

Decision

The payment from the eligible non-resident non-complying superannuation fund to the Australian resident will be taxed under 27CAA of the Income Tax Assessment Act 1936 and tax cannot be deferred on the payment from the eligible non-resident non-complying superannuation fund if it is rolled over to another non-complying superannuation fund in a foreign country.

Facts

The facts are:

*

the taxpayer was employed in a foreign country but remained an Australian resident throughout the period of foreign service;

*

the taxpayer's foreign earnings are exempt from tax under section 23AG of the Income Tax Assessment Act 1936;

*

a lump sum payment is to be made to the taxpayer on termination of employment; and

*

it is assumed that the fund in the foreign country is an eligible non-resident non-complying superannuation fund as defined in subsection 27A(1) of the Income Tax Assessment Act 1936.

Reasons For Decision

Under section 27CD of the Income Tax Assessment Act 1936, an 'exempt resident foreign termination payment' made in relation to a taxpayer is not assessable income in Australia. An exempt resident foreign termination payment is defined under subsection 27A(1) of the Income Tax Assessment Act 1936 as, inter alia, a payment made in respect of a taxpayer from an eligible non-resident non-complying superannuation fund within 6 months after the termination of employment or qualifying service.

Where the payment relates to a termination of employment, the conditions in paragraph 27A(1)(c) of the Income Tax Assessment Act 1936 of the definition of 'exempt resident foreign termination payment' must also be satisfied. Provided all these conditions are satisfied, the payment will be regarded as an exempt resident foreign termination payment and will be exempt from tax under section 27CD of the Income Tax Assessment Act 1936.

If these conditions are not met, the lump sum payment, being from an eligible non-resident non-complying superannuation fund, will be assessed under section 27CAA of the Income Tax Assessment Act 1936.

In relation to the second part of the question, tax can only be deferred if the payment is an eligible termination payment (ETP). The definition of eligible termination payments under paragraph 27A(1)(ma) of the Income Tax Assessment Act 1936 specifically excludes a payment from a fund that is an eligible non-resident non-complying superannuation fund. Consequently, even if the lump sum amount is rolled over to another non-complying fund in the foreign country, the roll-over provisions under the Act will not be effected and tax will not be deferred. The payment will still , be assessed under section 27CAA of the Income Tax Assessment Act 1936.

Legislative References:
Income Tax Assessment Act 1936
   section 23AG
   section 27CAA
   section 27CD
   subsection 27A(1)

Keywords
Non resident superannuation funds
Non-complying superannuation funds
Termination payments

Business Line:  Superannuation

Date of publication:  4 June 2001

ISSN: 1445-2782