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Edited version of private advice
Authorisation Number: 1051577467294
Date of advice: 9 September 2019
Ruling
Subject: Superannuation lump sums from a foreign fund
Question 1
Does Subdivision 305-B of the Income Tax Assessment Act 1997 (ITAA 1997) apply to a lump sum paid to an Australian resident from a pension plan overseas which meets the definition of foreign superannuation fund under subsection 995-1(1) of the ITAA 1997 where the lump sum is a Pension Commencement Lump Sum (PCLS)?
Answer
Yes.
Question 2
Does Subdivision 305-B of the ITAA 1997 apply to a lump sum paid to an Australian resident from the full commutation of their pension entitlements in an overseas pension plan which meets the definition of foreign superannuation fund under subsection 995-1(1) of the ITAA 1997?
Answer
Yes.
This ruling applies for the following period:
Income year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
Your Client was a member of a pension plan overseas (the Plan)
In the 20XX-XX income year, Your Client became a resident of Australia.
In the 20XX-XX income year, Your Client opened a foreign Self-Invested Personal Pension (SIPP).
In the 20XX-XX income year, Your Client transferred amounts from the Plan to their SIPP.
There were no previously exempt fund earnings in relation to the transfers from the Plan to the SIPP.
The SIPP satisfies the definition of a foreign superannuation fund under subsection 995-1(1) of the ITAA 1997.
There have been no contributions to the SIPP since Your Client became an Australian resident.
There has been no growth in the SIPP post 20XX.
Your Client intends to take the maximum PCLS from their SIPP (the 1st lump sum payment).
A PCLS is a lump sum that may be paid to a member of a pension scheme when they commence taking benefits from their scheme and can comprise a certain percentage of the capital value of the member's pension entitlement.
A PCLS is a superannuation lump sum pursuant to subsection 307-65(1).
Your Client will request the commencement of a pension from their SIPP, after the 1st lump sum payment has been received.
Your Client then intends to commute their pension and withdraw their entire interest in the SIPP as a lump sum (the 2nd lump sum payment).
Reasons for Decision
Subdivision 305-B deals specifically with superannuation lump sums from foreign superannuation funds.
Section 305-70 applies to superannuation lump sums received by an individual from a foreign superannuation fund more than six months after the individual either becomes an Australian resident or terminates their foreign employment.
As per the facts of this case, the SIPP is a foreign superannuation fund pursuant to subsection 995-1(1) and the PCLS is a lump sum pursuant to subsection 307-65(1).
The payment that results from a full commutation of a pension is a lump sum pursuant to subsection 307-65(1).
Your Client became a resident of Australia in the 2011-12 income year, and intends to receive a PCLS from their SIPP and a subsequent final lump sum on the withdrawal of their entire interest in the SIPP in the 2019-20 income year.
As this will be more than six months after Your Client became an Australian resident, section 305-70 applies to include any 'applicable fund earnings' in relation to the lump sums received from the foreign superannuation fund (the SIPP), in their assessable income.
The remainder of the lump sum payments is not assessable income and is not exempt income.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subdivision 305-B
Income Tax Assessment Act 1997 Section 305-70
Income Tax Assessment Act 1997 Subsection 307-65(1)
Income Tax Assessment Act 1997 Subsection 995-1(1)
All references are to the ITAA 1997 unless otherwise indicated.