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Edited version of your written advice
Authorisation Number: 1013084119552
Date of advice: 12 September 2016
Ruling
Subject: Lump sum from a foreign fund
Question
Is the lump sum payment assessable in Australia under the DTA between Australia and the foreign country?
Answer
No.
This ruling applies for the following periods:
Year ending 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You are a resident of Australia for taxation purposes.
You will receive a lump sum payment from a retirement benefit scheme in the foreign country.
You will not be taxed on the lump sum payment in the foreign country for the following reasons:
• The Fund is a "superannuation scheme" for the foreign country's taxation purposes;
• The withdrawal will be consistent with the rules of the Fund; and
• Withdrawals from superannuation schemes in the foreign country are generally not taxable if withdrawn in accordance with the Fund rules.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
Income Tax Assessment Act 1997 Subsection 52-10(1A)
International Tax Agreements Act 1953 Section 4
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.
Assessable income consists of ordinary income and statutory income provided it is neither exempt nor non-assessable non-exempt income.
Subsection 6-10(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that an amount is statutory income if it is not ordinary income but is included in assessable income by another provision.
Section 10-5 of the ITAA 1997 lists the provisions about assessable income. Included in this list is section 305-70 of the ITAA 1997.
In determining your liability to pay tax in Australia it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreements.
Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations).
Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The agreement relating to this relevant foreign country is listed in section 5 of the Agreements Act.
The agreement operates to avoid the double taxation of income received by residents of Australia and the foreign country.
The lump sum payment you receive from the retirement benefit scheme will not be taxed in Australia under the double tax agreement between Australia and the foreign country.