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Edited version of your written advice
Authorisation Number: 1012800923748
Ruling
Subject: Foreign lump sum payment
Question
Will section 305-70 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to include the 'applicable fund earnings' amount (if any) in the Taxpayer's assessable income for the 2014-15 income year?
Answer
Yes
This ruling applies for the following periods
Income year ending 30 June 2015
The scheme commences on
1 July 2014
Relevant facts and circumstances
The Taxpayer became an Australian resident for tax purposes during the 2014-15 income year.
The Taxpayer held benefits in Foreign Funds.
The Taxpayer received a lump sum from one of the Foreign Funds during the 2014-15 income year.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 305-70
Acts Interpretation Act 1901 subsection 2G(2)
Reasons for decision
Summary
As the taxpayer received a lump sum from a Foreign Fund more than six months after the Taxpayer became an Australian resident for tax purposes, section 305-70 of the Income Tax Assessment Act 1997 applies to include the 'applicable fund earnings' amount (if any) in their assessable income in the 2014-15 income year.
Detailed reasoning
The applicable fund earnings amount in relation to a lump sum payment from a foreign superannuation fund, that is received more than six months after a person has become an Australian resident, is assessable under section 305-70 of the ITAA 1997.
According to subsection 2G(2) of the Acts Interpretation Act 1901:
(2) In any Act, a reference to a period of 2 or more months is a reference to a period:
(a) starting at the start of a day of one of the calendar months (the starting month ); and
(b) ending:
i. immediately before the start of the corresponding day of the calendar month that is that number of calendar months after the starting month; or
ii. if there is no such day--at the end of the calendar month that is that number of calendar months after the starting month.
Example 1: A reference to 6 months starting on 15 December in a year is a reference to a period starting on that day and ending immediately before 15 June in the next year.
Example 2: A reference to 6 months starting on 31 October in a year is a reference to a period starting on that day and ending at the end of April in the next year (because April is the calendar month coming sixth after October and does not have 31 days).
The Taxpayer became a resident of Australia for tax purposes on the 11th day of a month during the 2014-15 income year. The relevant transfer from the Foreign Fund occurred on 12th of the month 6 months after the Taxpayer became an Australian resident. This was more than six months after the Taxpayer became an Australian resident for tax purposes.
Whilst we sympathise with the Taxpayer's situation, unfortunately due to the application of the time limits contained within the ITAA 1997, and the interpretation as prescribed by the Acts Interpretation Act 1901 the Commissioner does not have any discretion to alter the dates pertaining to the six month period.
As a result section 305-70 of the ITAA 1997 will apply to include the 'applicable fund earnings' amount (if any) in the Taxpayer's assessable income for the 2014-15 income year.