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Edited version of your written advice
Authorisation Number: 1051504055064
Date of advice: 9 April 2019
Ruling
Subject: Lump sum payment from a foreign fund paid to a member having a terminal medical condition
Question
Will the payment from a foreign superannuation plan to the taxpayer be ‘tax-free’ under section 303-10 of the Income Tax Assessment Act 1997 because a terminal medical condition exists in relation to the taxpayer?
Answer
No.
This ruling applies for the following periods:
Income year ending 30 June 2019
Income year ending 30 June 2020
The scheme commences on:
1 July 2018
Relevant facts and circumstances
Your Client has been diagnosed with a terminal medical condition, which could result in their passing within 12 months.
Your Client holds an interest in a superannuation plan overseas.
Your Client intends to transfer their entire interest in the overseas plan to their Australian bank account.
The overseas plan is not a complying superannuation plan.
You have requested the lump sum payment Your Client intends to receive from their overseas superannuation plan be treated as tax-free due to their terminal illness.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 303-10
Reasons for decision
Summary
Your Client will not satisfy the conditions of section 303-10 of the Income Tax Assessment Act 1997 (ITAA 1997) and will not be able to treat the lump sum payment from the foreign superannuation plan as ‘tax-free’.
Detailed reasoning
Section 303-10 of the ITAA 1997 sets out the tax treatment of a superannuation lump sum member benefit paid to a member with a terminal medical condition. Section 303-10 of the ITAA 1997 states:
(1) This section applies to a *superannuation member benefit that:
(a) is a *superannuation lump sum; and
(b) is:
(i) paid from a *complying superannuation plan; or
(ii) a *superannuation guarantee payment, a *small superannuation account payment, an *unclaimed money payment, a *superannuation co-contribution benefit payment or a *superannuation annuity payment.
(2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you when you receive the lump sum or within 90 days after you receive it.
In this case, before examining whether the taxpayer meets any of the other requirements of section 303-10 of the ITAA 1997, it is important to note that the lump sum payment Your Client intends to receive from their overseas plan, is not from a complying superannuation plan.
Consequently, Your Client will not satisfy the conditions of section 303-10 of the ITAA 1997 and will not be able to treat the lump sum payment from the foreign superannuation plan as ‘tax-free’.
It should be noted that where the conditions set in the terminal medical condition provisions are not met, the Commissioner has no discretion within those provisions to treat superannuation lump sum payments as non-assessable non-exempt income.