Edited version of private advice

Authorisation Number: 1052317944346

Date of advice: 2 December 2024

Ruling

Subject: Foreign retirement income

Question 1

Does the balance of funds rolled over to the IRA from the existing foreign Retirement Plan while a non-resident constitute the corpus of the IRA under paragraph 99B(2)(a) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer 1

Yes. The assets transferred from the existing foreign Retirement Plan to the IRA are considered corpus of the IRA and the exception in paragraph 99B(2)(a) applies.

Question 2

Will future withdrawals as a resident Australian taxpayer from the IRA be subject to income tax under subsection 99B(1) of the ITAA 1936?

Answer 2

Yes.

Any withdrawals from the IRA completed when you were an Australian resident will be included in your assessable income under subsection 99B(1) of the ITAA 1936. Any amounts that are corpus and are not attributable to amounts derived by the IRA that if they had been derived by a resident would have been included in assessable income will reduce the amount included under subsection 99B(1).

Question 3

Will you be entitled to a foreign income tax offset for income tax paid in the US on withdrawal of the IRA?

Answer 3

Yes.

Subsection 770-130(1) of the Income Tax Assessment Act 1997 provides that a FITO can be claimed for foreign tax paid in respect of an amount that is included in your assessable income.

You are only entitled to claim foreign income tax offset when you have paid tax on your Roth IRA in the USA. If tax has not been withheld from the Roth IRA in the USA at time of withdrawal, there will be no corresponding offset applicable in Australia.

This ruling applies for the following periods:

DD MM YY to DD MM YY

The scheme commenced on:

DD MM YY

Relevant facts and circumstances

In YYYY your relocated from Australia to overseas.

In MM YY, you received citizenship overseas.

You were employed overseas between the period YY to YY.

Between YY and YY you were a tax resident of another country.

In respect of your overseas based employment, you participated in an Individual Retirement Account (IRA) which was issued by your employer.

In MM YY, whilst you were a non-resident of Australia, you rolled over the balance of your existing IRA into a new individual IRA account that was held with a company. The balance rolled over was approximately $XXXX.

On the DD MM YY, you renounced your overseas citizenship.

In MM YY, you relocated to Australia and commenced your Australian tax residency, you intend to withdraw amounts from your IRA while a tax resident of Australia.

Assumption

The IRA will not qualify as a 'foreign superannuation fund' for Australian tax purposes and that the IRA will be recognised as a non-resident trust under section 99B of the ITAA 1936.

You will pay foreign income tax on the amounts that are withdrawn.

Relevant legislative provisions

Income Tax Assessment Act 1936, section 99B

Income Tax Assessment Act 1936, paragraph 99B(2)(a)

Income Tax Assessment Act 1997, subsection 770-10(1)