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Ruling

Subject: Lump sum from a foreign superannuation fund

Question

Is any part of the lump sum payment transferred from a foreign pension scheme to an Australian superannuation fund assessable as applicable fund earnings under section 305-70 of the Income Tax Assessment 1997 (ITAA 1997)?

Answer

No

This ruling applies for the following period

For the year ended 30 June 2012

This scheme commenced on

1 July 2011

Relevant facts and circumstances

You are under 40 years of age.

You are an Australian citizen but had been out of Australia and therefore a tax resident of other countries since 2001.

You became a member of a foreign fund in the 2008-09 income year. The foreign fund was established outside Australia.

You resumed your residency of Australia at the beginning of the 2011-12 income year.

You transferred your benefits from the foreign fund into an Australian superannuation fund (the fund) within six months of resuming your Australian residency.

The trustee of the fund received the transferred amount in the 2011-12 income year.

No amount has been transferred into the foreign fund from any other foreign superannuation funds.

You no longer have an interest in the foreign fund.

Relevant legislative provisions

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

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 transferred from your foreign superannuation fund to an Australian superannuation fund within six months of you resuming your Australian residency is not assessable income and is not exempt income.

Detailed reasoning

Lump sum payments made from a foreign superannuation fund

Superannuation benefits paid by foreign superannuation funds are taxed in accordance with subdivision 305-B of the Income Tax Assessment Act 1997 (ITAA 1997).

Before determining whether an amount is assessable under subdivision 305-B of the ITAA 1997, it is necessary to ascertain whether the payment is being made from a foreign superannuation fund. If the entity making the payment is not a foreign superannuation fund then subdivision 305-B of the ITAA 1997 will not apply to the payment received.

Foreign superannuation fund

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:

(i) the total market value of the funds assets attributable to superannuation interests held by active members; or

(ii) the sum of the amounts that would be payable to or in respect of active members if they voluntarily ceased to be members; 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 were a member of a foreign pension scheme (the foreign fund).

The foreign fund is a superannuation fund that is established in overseas. Its central management and control would ordinarily be outside of Australia. Therefore the overseas fund is not an Australian superannuation fund as defined in subsection 295-95(2) of the ITAA 1997 and falls within the definition of foreign superannuation fund in subsection 995-1(1) of the ITAA 1997.

Lump sum payment received less than six months after becoming an Australian resident

Where a lump sum payment is received within six months from the date you become a resident of Australia, section 305-60 of the ITAA 1997 applies:

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:

(i) when you were not an Australian resident; or

(ii) starting after you became an Australian resident and ending before you receive the payment; and

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

In your case, you are an Australian citizen but had been a tax resident of other countries since 2001. You became a member of the foreign fund in the 2008-09 income year. The superannuation benefit relates to the period you were not an Australian resident.

You returned back to Australia in the beginning of the 2011-12 income year. You transferred your superannuation benefits from the foreign fund to an Australian superannuation fund within six months of resuming your Australian residency. As the lump sum payment was transferred within six months of you resuming your Australian residency; the amount is not assessable income and is not exempt income under section 305-60 of the ITAA 1997. It therefore does not need to be shown on your income tax return.