Issue
Whether the receipt by the taxpayer of a lump sum superannuation payment from a United Kingdom (UK) pension scheme, with receipt of the money in either the UK or Australia, is assessable income in Australia.
Decision
A receipt by the taxpayer of a lump sum superannuation payment from a United Kingdom (UK) pension scheme; with receipt of the money in either the UK or Australia, is assessable income in Australia.
Facts
The taxpayer has been a resident of Australia since December 1993. The taxpayer was a resident of the UK between 1974 and 1991. The taxpayer otherwise resided in New Zealand.
Upon turning 50 years of age, the taxpayer is eligible, in the UK, for early retirement.
The taxpayer has two UK pension schemes. Both are funded from employer contributions only.
The taxpayer has been advised that any lump sum payments that they receive from the pension schemes are exempt from tax in the UK.
Reasons For Decision
A portion of the lump sum superannuation payment is included in assessable income pursuant to section 27CAA of the Income Tax Assessment Act 1936 (ITAA 1936).
Section 27CAA (ITAA 1936) includes in assessable income the gross amount of any lump sum received less the accumulated entitlement and any additional contributions. The accumulated entitlement is the amount properly payable to the taxpayer immediately before the day the taxpayer became a resident of Australia. The additional contributions are any contributions made to the fund after the taxpayer became a resident of Australia. In simple terms, the assessable amount is the earnings of the fund since the taxpayer became a resident of Australia.
There is no requirement under section 27CAA (ITAA 1936) that the benefit be paid in Australia. Therefore, section 27CAA would apply whether the taxpayer transfers the benefit to Australia or it remains overseas. Furthermore, section 27CAA (ITAA 1936) does not mention the age of the taxpayer. Therefore section 27CAA (ITAA 1936) is applicable whether the taxpayer received the payment now or delayed retirement for a few years.
The benefit is not an eligible termination payment (ETP) because it is specifically excluded under paragraph (ma) of the definition of an 'eligible termination payment' in subsection 27A(1) (ITAA 1936).