Issue
Is the eligible termination payment (ETP) made from an Australian resident superannuation fund to the taxpayer who is a Norfolk Island resident after 1 July 1998 assessable income?
Decision
Yes. The ETP forms part of the taxpayer's assessable income under the Income Tax Assessment Act 1936 (ITAA 1936).
Facts
The taxpayer, a resident of Norfolk Island, received an ETP in July 1998 from an Australian resident superannuation fund. The superannuation fund had deducted tax instalments from the ETP.
Reasons for Decision
Taxation Ruling IT 2168 states that a non resident is subject to Australian tax on an ETP from a superannuation fund if it is derived from sources in Australia. The source of such a payment is the location of the superannuation fund against which the payment is made, and not where the employee's services are performed. An ETP charged against a superannuation fund that is established and controlled in Australia has its source in Australia.
Residents of Norfolk Island are subject to tax from sources within Norfolk Island and outside Norfolk Island. However an amount may be exempt from tax under paragraph 24G(1)(e) of the ITAA 1936 if the Commissioner of Taxation (Commissioner) is satisfied that the taxpayer intended to remain on Norfolk Island for more than 6 months from when they commenced to perform duties of an office or employment and those duties are wholly or mainly performed in Norfolk Island.
It is considered that the exemption under paragraph 24G(1)(e) of the ITAA 1936 only applies to income received from 'performing duties of an office or employment' on Norfolk Island. It does not include a payment of an ETP from an Australian sourced superannuation fund. The source of a superannuation fund payment is the location of the particular fund or branch against which the payment is finally charged, and not the place where the employee's services are performed.
The benefit paid to the taxpayer accordingly forms part of the taxpayer's assessable income as an ETP.