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Edited version of private ruling
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Ruling
Subject: Foreign Investment Funds
Question
Is the growth in your Country B superannuation fund subject to tax in Australia if the benefits are retained in Country B while you are an Australian tax resident?
Answer:
No.
This ruling applies for the following period:
Year ending 30 June 2011
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You are an Australian resident who recently emigrated from Country B to Australia.
You have a superannuation fund in Country B
The fund has a value and grows each year in line with Country B inflation and fund earnings.
Due to the recent decrease in the Country B/AUD exchange rate, you are considering leaving your Country B super fund in Country B to grow indefinitely.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2).
Reasons for decision
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.
Foreign investment funds
Prior to the 2010-11 income year, Australian resident taxpayers who had interests in certain foreign investment funds (FIFs), were subject to tax on an accruals basis on the growth in value of their FIF under the FIF measures.
The FIF measures have been repealed by the Tax Laws Amendment (Foreign Source Income Deferral) Bill (No1) 2010 which received royal assent as Act No 114 of 2010. This Act repeals the FIF measures and the deemed present entitlement rules in relation to the 2010-11 and later income years.
Therefore, from 1 July 2010 Australian residents with non-controlling shareholdings in foreign companies or with interests in foreign trusts no longer need to include income on an attribution basis under the FIF measures.
Accordingly, the FIF measures do not apply to your interests in your Country B super fund as of 1 July 2010.