Edited version of private advice

Authorisation Number: 1051982626378

Date of advice: 17 May 2022

Ruling

Subject: Foreign retirement fund - foreign trust income

Question 1

Will the amount you received from the foreign retirement fund be assessed as a superannuation lump sum under the provisions of subdivision 305-B of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No. According to subsection 995-1(1) of the ITAA 1997, for a fund to qualify as a foreign superannuation fund it must operate in the same manner as an Australian superannuation fund as defined in subsection 10(1) of the Superannuation Industry (Supervision) Act 1993 (SISA). The SISA defines a superannuation fund as one which provides benefits to the member exclusively upon retirement or after attainment age has been reached, or on the member's death.

The foreign retirement fund handbook confirms that funds held by the plan may be accessed upon termination of employment with the company, which is a reason other than those listed in the SISA. Therefore, the foreign retirement fund does not meet the definition of a foreign superannuation fund and any amounts received will not be assessed under the provisions of subdivision 305-B of the ITAA 1997.

Question 2

Will the amount you received from the foreign retirement fund be subject to tax under section 99B of the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer

Yes. The foreign retirement fund is a foreign resident trust, therefore amounts received as a beneficiary of that trust may be assessable under section 99B of the ITAA 1936.

Personal and employer contributions to the foreign retirement fund will not be assessable as these amounts represent the corpus of the trust estate and are therefore excluded from your assessable income under subsection 99B(2) of the ITAA 1936.

However, the amount that represents fund earnings will be assessable as income under subsection 99B(1) of the ITAA 1936.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were employed overseas by a foreign company.

The company sponsored a retirement savings scheme which received contributions from your monthly salary as well as co-contributions from the company.

You have already paid tax as an Australian resident on the personal contributions from your monthly salary.

Employer contributions and capital gains have not been taxed.

The foreign retirement fund was managed by an insurance and financial services provider based in Country A.

You contributed to the foreign retirement fund only during your period of employment however you remained a member of the plan until 20XX when you withdrew the total balance comprising your contributions, employer contributions, and capital gains.

The foreign retirement fund handbook states that the value of the account may be withdrawn upon retirement or at any time after ceasing employment with the company.

You have always remained an Australian resident for taxation purposes.

Relevant legislative provisions

Income Tax Assessment Act 1997 subdivision 305-B

Income Tax Assessment Act 1936 section 99B