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1 Will a lump sum payment from the foreign superannuation fund or a portion thereof derived by the applicant be assessable under section 305-70 of the Income Tax Assessment Act 1997 ?

Yes. Question 2 If the answer to question 1 is yes, will the assessable 'applicable fund earnings' be calculated as the difference between the Australian dollar equivalents of the lump sum they receive and the lump sum entitlement just before the day they first became an Australian tax resident? Answer Yes. Question 3 If the answer to question 1 is yes, can the applicant choose pursuant to subsection 305-80(2) of the Income Tax Assessment Act 1997 to have some or all of the applicable fund earnings included in the assessable income of their Australian complying superannuation fund? Answer No. Question 4 If the answer to question 1 is no, will a lump sum payment from the foreign superannuation fund or a portion thereof derived by the applicant be assessable under section 99B of the Income Tax Assessment Act 1936 ? Answer Not applicable This ruling applies for the following period : Year ending in YYYY

You were born on DD MM YYYY and worked the first half of your career in Country A but have been in Australia for approximately the last xx years after arriving here with your partner on the DD MM YYYY. While living and working in Country A you became a member of the foreign superannuation fund (the Fund). No contributions or transfers have been made to the Fund for your benefit since you left Country A. You have not ever previously received a lump sum payment from the Fund and the Fund has not made any other payments or transfers for your benefit. You reached the retirement age for the Fund purposes on DD MM YYYY and, notwithstanding that you have not yet reached the normal Country A pension age (currently xx years of age), you are able to access amounts from the Fund in the form of a pension and one-off lump sum benefit payment. You received in writing, dated DD MM YYYY a retirement quote advice telling you that you could receive a one-off lump sum of approximately xxx along with an annual pension of approximately xxx. As at DD MM YYYY, the corresponding figures were a one-off lump sum of xxx and an annual pension of xxx.

The component of the Fund relevant to your payment is the 'Retirement Income Builder'. This is the defined benefit part of the scheme, and it provides members a guaranteed pension income and a one-off lump sum upon retirement, based on a fixed formula that considers pensionable salary and years of service. The defined benefit section covers earnings up to a set salary threshold. You also have an Australian superannuation fund with Superannuation A. The Fund The Fund was established in Country A for the purpose of providing pension and other superannuation benefits for academic and senior staff employed by the universities and other educational institutions of Country A and for other such persons employed by those universities and institutions as may be eligible to join the scheme. The Fund's registered office is in Country A and the Fund is governed by a Trust Deed and Scheme Rules. You provided us with a copy of the Scheme Rules and those Scheme Rules are wholly incorporated into these facts and circumstances.

Income Tax Assessment Act 1997 section 295-95 Income Tax Assessment Act 1997 section 305-70 Income Tax Assessment Act 1997 section 305-75 Income Tax Assessment Act 1997 section 305-80 Income Tax Assessment Act 1997 subsection 995-1 Superannuation Industry (Supervision) Act 1993 section 10

All legislative references are to the Income Tax Assessment Act 1997 unless otherwise specified. Question 1 Will a lump sum payment from the foreign superannuation fund or a portion thereof derived by the applicant be assessable under section 305-70 of the Income Tax Assessment Act 1997 ? Summary Yes, the lump sum payment from the foreign superannuation fund or a portion thereof derived by the applicant will be assessable under section 305-70. Detailed reasoning Lump sum payments from foreign superannuation funds Section 305-70 can apply to assess people on lump sum payments they receive from foreign superannuation funds more than 6 months after they become Australian residents for tax purposes. Ordinarily, the assessable part of the lump sum comprises the 'applicable fund earnings' worked out under subsection 305-75(3) and these applicable fund earnings are subject to tax at the person's marginal rate. The rest of the lump sum is not assessable income and is not exempt income.

Section 305-70 only applies where the lump sum payment is made by a foreign superannuation fund. If the entity making the payment is not a foreign superannuation fund, then section 305-70 will not have any application. Subsection 995-1(1) says a superannuation fund is a 'foreign superannuation fund' at a time if the fund is not an Australian superannuation fund and is a 'foreign superannuation fund' for an income year if the fund is not an Australian superannuation fund for the income year. Section 295-95(2) says a superannuation fund is an 'Australian Superannuation fund' at a time, and for the income year in which that time occurs, if; a)            the fund was established in Australia, or any asset of the fund is situated in Australia at that time; and b)            at that time, the central management and control of the fund is ordinarily in Australia; and c)            at the time either the fund had no member covered by subsection (3) (an active member) or at least 50% of: i.          the total market value of the fund's assets attributable to superannuation interest held by active members; or

ii.         the sum of the amounts that would be payable to or in respect of active members if they voluntarily ceased to be members; is attributable to superannuation interests held by active members who are Australian residents. Subsection 995-1(1) defines superannuation fund as having the same meaning given by section 10 of the Superannuation Industry (Supervision) Act 1993 ( SIS Act). Subsection 10(a) of the SIS Act provides a superannuation fund is a fund that is an indefinitely continuing fund and is a provident, benefit, superannuation or retirement fund. The High Court examined both the terms 'superannuation fund' and 'fund' in Scott v Commissioner of Taxation of the Commonwealth (No. 2) (1966) 10 AITR 290; (1966) 40 ALJR 265; (1966) 14 ATD 333. In that case, Justice Windeyer stated that a superannuation fund must be 'a fund bona fide devoted as its sole purpose to providing for employees who are participants money benefits (or benefits having a monetary value) upon their reaching a prescribed age'. The Fund is a foreign superannuation fund The Fund was established in Country A and is not an Australian superannuation fund as defined in subsection 295-95(2). The Fund was:

a)            not established in Australia; and b)            the central management and control of the Fund is ordinarily in Country A. The Fund satisfies the characteristics of a superannuation fund as its as it is solely devoted to providing money benefits to participants upon their reaching a prescribed age. Based on the information provided, the Commissioner considers the Fund to be a foreign superannuation fund, meaning the lump sum from the Fund will be assessable under section 305-70 because you are receiving the lump sum more than six months after you became an Australian resident. Question 2 If the answer to question 1 is yes, will the assessable 'applicable fund earnings' be calculated as the difference between the Australian dollar equivalents of the lump sum they receive and the lump sum entitlement just before the day they first became an Australian tax resident. Summary The applicable fund earnings are calculated under section 305-75(3) because you became an Australian resident after the start of the period to which the lump sum relates. Detailed reasoning

The 'applicable fund earnings' are worked out under section 305-75. Subsection 305-75(3) applies where the person becomes an Australian resident after the start of the period to which the lump sum relates. Subsection 305-75(3) states: (3)            If you become an Australian resident after the start of the period to which the lump sum relates (but before you received it) the amount of your applicable fund earnings is the amount (not less than zero) worked out as follows: a)           work out the total of the following amounts: i.          the amount in the fund that was vested in you just before the day (the start day) you first became an Australian resident during the period; ii.          the part of the payment that is attributable to contributions to the fund made by or in respect of you during the remainder of the period; iii.          the part of the payment (if any) that is attributable to amounts transferred into the fund from any other foreign superannuation fund during the remainder of the period; b)           subtract that total amount from the amount in the fund that was vested in you when the lump sum was paid (before any deduction for foreign tax);

c)           multiply the resulting amount by the proportion of the total days during the period when you were an Australian resident; d)           add the total of all previously exempt fund earnings (if any) covered by subsections (5) and (6). You had an amount in the Fund that was vested in you just before the day you first became an Australian resident. Your applicable fund earnings will be the difference between this amount and the amount in the Fund that was vested in you when the lump sum is paid. The calculation is this simple because no contributions or transfers have been made to the Fund for your benefit since you left Country A, you have been an Australian tax resident for the whole time since you first became an Australian tax resident, and you have no previously exempt fund earnings. Therefore, your applicable fund earnings will be the difference between the Australian dollar equivalent of the lump sum you received and your lump sum entitlement just before the day you became an Australian tax resident. Question 3 If the answer to question 1 is yes, can the applicant choose pursuant to subsection 305-80(2) of the Income Tax Assessment Act 1997

to have some or all of the applicable fund earnings included in the assessable income of their Australian complying superannuation fund? Summary No, you cannot choose to have any of your applicable fund earnings included in the assessable income of a complying superannuation fund because you will continue to have a superannuation interest in the Fund, which is a foreign superannuation fund. Detailed reasoning Section 305-80 provides the choice to transfer a lump sum payment into a complying superannuation fund so that the amount is subject to 15% tax, as opposed to a person's marginal tax rate. To qualify for this choice, subsection 305-80(1) provides the requirements that must be satisfied. One of the requirements are that the individual must immediately after the relevant payment is made, no longer have an interest in the paying fund. In this case, you will continue to be in receipt of a pension from the Fund and will still have an interest in the Fund thereby not satisfying paragraph 305-80(1)(d) making you ineligible to choose the option to transfer the lump sum amount to a complying superannuation fund. Question 4

Will a lump sum payment from the foreign superannuation fund or a portion thereof derived by the applicant be assessable under section 99B of the Income Tax Assessment Act 1936 ? Summary Not applicable. Detailed reasoning The lump sum payment is subject to tax under section 305-70 and section 99B of the ITAA 1936 will not apply.