Edited version of private advice

Authorisation Number: 1052355235486

Date of advice: 4 February 2025

Ruling

Subject: 99B - lump sum

Question 1

Will the lump sum payment to you from the Plan be included in your assessable income under subsection 99B(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer

Yes.

Question 2

Will the amounts included in your assessable income under subsection 99B(1) of the ITAA 1936 be partially reduced under paragraph 99B(2)(a) of the ITAA 1936?

Answer

Yes.

Subject to accurate accounting and bookkeeping demonstrating that the amounts received represent the original contributed amounts to the Plan.

On the basis that the portion of the distribution received has a component that is attributable to the corpus being original contributions from yourself and your employer, the Commissioner considers that those amounts are attributable to corpus and will operate to reduce the amount subject to taxation under section 99B(1) of the ITAA 1936.

Question 3

Can you claim a Foreign Income Tax Offset (FITO) under Division 770 of the Income Tax Assessment Act 1997 (ITAA 1997) for the tax withheld from the Savings Plan?

Answer

Yes.

You will be entitled to claim a FITO that corresponds to the tax paid on the proportion of the Savings Plan that is included in your assessable income under section 99B of the ITAA 1936.

This ruling applies for the following period:

Year ended XX XX 20XX

The scheme commenced on:

XX XX 2020

Relevant facts and circumstances

You became an Australian resident for tax purposes on XX XX 20XX.

Prior to this, you were a resident of Country A for income tax purposes. During your time as a resident of Country A, you established two tax-advantage funds being a:

1.            Deferred compensation plan; and

2.            Health Savings Account (HSA).

The deferred compensation plan

You became a member of the deferred compensation plan in 20XX. The deferred compensation plan allowed you to save pre-tax dollars you earned as a resident of Country A towards your retirement.

The deferred compensation plan is not considered a foreign superannuation find as defined in section 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997).

Since becoming a resident of Australia, you received a lump sum payment of $XX. From this lump sum payment, you paid tax in Country A.

The HSA

You opened the HSA account in 20XX. Your HSA allowed you to save pre-tax dollars you earned as a resident of Country A for tax purposes which you could then use for future qualified medical expenses.

Since becoming an Australian resident, you have drawn upon your HSA fund to pay for medical expenses.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 99B