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Edited version of your written advice
Authorisation Number: 1012843987759
Date of advice: 20 July 2015
Ruling
Subject: Lump sum transfer from foreign super fund
Question and answer
Is the income accumulated in your retirement plan included in your assessable income if you do not withdraw the funds?
No.
This ruling applies for the following periods:
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
Year ending 30 June 2019
The scheme commenced on:
1 July 2014
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You are a resident of Australia for taxation purposes.
You are a duel citizen of Country Y and Australia.
You have a retirement fund in Country Y.
You will not be drawing any funds from the accounts until you reach the relevant retirement age.
The accounts are not taxed in Country Y until money is withdrawn from them.
Relevant legislative provisions:
Income Tax Assessment Act 1936 subsection 99B(1)
Income Tax Assessment Act 1936 paragraph 99B(2)(a)
Income Tax Assessment Act 1936 subsection 481(3)
Income Tax Assessment Act 1997 section 6-10
Income Tax Assessment Act 1997 subsection 6-10(4)
Income Tax Assessment Act 1997 section10-5
Reasons for decision
A foreign trust is defined in subsection 481(3) of the Income Tax Assessment Act 1936 (ITAA 1936) as a trust which is not an Australian trust, and which did not result from a will or an intestacy in relation to the estate of a deceased person.
You have a retirement account in Country Y.
The account is a personal savings plan that gives you tax advantages for setting aside money for retirement.
This account is set up for the exclusive benefit of you or your beneficiaries.
The account is a foreign trust as defined in subsection 481(3) of the ITAA 1936 and is therefore a foreign investment fund (FIF). The account is not a superannuation fund for the purposes of the ITAA 1997 and the ITAA 1936 as it allows for withdrawals for pre-retirement purposes. Therefore the account is not established solely for the provision of retirement benefits.
Repeal of FIF measures
On 14 July 2010, the FIF measures were repealed and do not apply from the 2010-11 income year onwards.
If you have an interest in a FIF, you will be subject to the general tax rules applicable to your circumstances - for example, the general tax rules relating to trust income.
Assessability of trust income
Section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes statutory income amounts that are not ordinary income but are included in assessable income by another provision.
Subsection 6-10(4) of the ITAA 1997 provides that for an Australian resident, your assessable income includes statutory income derived from all sources, whether in or out of Australia, during the income year.
Section 10-5 of the ITAA 1997 lists certain statutory amounts that form part of assessable income. Included in this list is income derived pursuant to section 99B of the ITAA 1936.
Subsection 99B(1) of the ITAA 1936 provides that where, during a year of income, a beneficiary who was a resident at any time during the year is paid a distribution from a trust, or has an amount of trust property applied for their benefit, the amount is to be included in the assessable income of the beneficiary.
Subsection 99B(2) of the ITAA 1936 modifies the rule in subsection 99B(1) and has the effect that the amount to be included in assessable income under subsection (1) is not to include any amount that represents either:
• the corpus of the trust (paragraph 99B(2)(a) of the ITAA 1936)
• amounts that would not have been included in the assessable income of a resident taxpayer (paragraph 99B(2)(b) of the ITAA 1936), and
• amounts previously included in the beneficiaries income under section 97 of the ITAA 1936 (paragraph 99B(2)(c) of the ITAA1936).
Paragraph 99B(2)(a) of the ITAA 1936 requires regard to be had to whether or not the amount derived by a trust estate was of a kind that would have been assessable if derived by a resident taxpayer. Thus, for example, if, in accordance with the terms of the trust, income were accumulated and added to corpus and the capitalised amount is subsequently paid or applied for the benefit of a beneficiary, the beneficiary would be assessable on the amount provided (subject to other paragraphs of subsection 99B(2) of the ITAA 1936).
In this case, you do not intend to withdraw any amounts from your account until you retire. Until you withdraw from the account no income has been paid to you or applied for your benefit. Therefore, any income that is accumulated in the account is not assessable to you if you do not withdraw the funds.