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Edited version of your private ruling
Authorisation Number: 1012540801605
Ruling
Subject: a lump sum payment from a foreign pension fund
Question 1
Can section 305-60 of the Income Tax Assessment Act 1997 be applied to the transfer of superannuation benefits from an overseas pension scheme where the transfer was delayed, through no fault of the taxpayer, and did not take place within the required six month period?
Answer
No.
This ruling applies for the following period:
2013-14 income year
The scheme commences on:
1 July 2013.
Relevant facts and circumstances
You advised that the date of residency (residency date).
Your client held an interest in a foreign pension fund (the Pension Fund).
Your client advised the Pension Fund of their intention to transfer pension funds to a complying Australian superannuation fund.
Your client undertook a number of steps to facilitate the transfer of funds from the Pension Fund to the Australian superannuation fund.
More than six months after residency date, your client's Australian superannuation fund advised that the transfer of funds from the Pension Fund has been completed. A lump sum amount of $[amount] was received.
There have been no contributions to the Pension Fund since your client migrated to Australia.
There have been no transfers into the Pension Fund from other foreign pension schemes by your client since becoming a resident of Australia.
Funds cannot be accessed from the Pension Fund other than at retirement.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 305-60
Reasons for decision
Summary
Section 305-60 of the ITAA 1997 cannot apply to treat the superannuation lump sum as not assessable income and not exempt income. The legislation does not contain a discretion that can be exercised by the Commissioner in regards to the required six month period where the transfer was delayed through no fault of the taxpayer.
Detailed reasoning
Not assessable, not exempt income
Under section 305-60 of Income Tax Assessment Act 1997 (ITAA 1997), 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.
Basically if the payment from the foreign superannuation fund is received within six months from the time your client became a resident of Australia, it will be not assessable income and not exempt income.
In this case, your client received the lump sum payment more than six months after they became a resident of Australia for tax purposes. Therefore section 305-60 cannot apply to deem the superannuation lump sum payment as not assessable and not exempt income.
The legislation requires that the payment be made within six months of a taxpayer becoming a resident of Australia. Whilst we appreciate that the delay was through no fault of your client, the fact remains that the payment took place more than six months after she became a resident of Australia.
The legislation does not contain a discretion that can be exercised by the Commissioner in regards to the required six month period. Therefore in your client's case, section 305-60 of the ITAA 1997 cannot apply to treat the superannuation lump sum as not assessable income and not exempt income.