Assessability of an Australian sourced eligible termination payment paid to a Singaporean resident

Is the taxpayer, a Singaporean resident, assessable under subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997) on an eligible termination payment (ETP) received from a complying Australian superannuation fund?

Yes. The taxpayer, a Singaporean resident, is assessable under subsection 6-10(5) of the ITAA 1997 on an ETP received from a complying Australian superannuation fund.

The taxpayer is a Singaporean resident and is not an Australian resident for income tax purposes.

The taxpayer received an ETP, as defined in paragraph 27A(1) of the Income Tax Assessment Act 1936 (ITAA 1936), from a complying Australian superannuation fund. The ETP consisted of both a concessional component and a post-June 1983 taxed element.

Paragraph 27B(1)(a) and subsection 27C(2) of the ITAA 1936 include the post-June 1983 taxed element and the concessional component respectively in the assessable income of a taxpayer.

The assessable income of a non-resident, however, only includes the statutory income from Australian sources (subsection 6-10(5) of the ITAA 1997).

A non-resident's assessable income will therefore only include the post-June 1983 taxed element and the concessional component where the ETP has an Australian source.

The ETP was paid by a superannuation fund that was established and controlled in Australia and so has an Australian source (paragraph 45 of Taxation Ruling IT 2168). It will form part of the non-resident's assessable income.

In determining liability to tax on Australian source income received by a non-resident, it is necessary to also consider any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act).

The taxpayer is a resident of Singapore, a country with which Australia has entered into a tax treaty. Therefore, the tax treaty between Australia and Singapore (the Singapore Agreement) and the protocols to that treaty contained in Schedule 5 and 5A of the Agreements Act respectively must be considered in determining whether the ETP paid to the taxpayer is taxable in Australia.

Section 7 of the Agreements Act gives the Singapore Agreement the force of law in Australia. Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one.

Article 11 of the Singapore Agreement deals with remuneration in respect of personal services. It does not apply to amounts paid by a complying superannuation fund that constitute an ETP under paragraph 27A(1)(b) of the ITAA 1936 because such amounts are not remuneration paid in respect of personal services.

Article 13 of the Singapore Agreement deals with pensions and annuities. It does not apply because an ETP is not a periodic payment that attracts the application of Article 13.

Article 16A of the Singapore Agreement provides that items of income which are not expressly mentioned in the foregoing Articles of the Singapore Agreement shall be taxable in accordance with the laws of the Contracting State. As the ETP is not dealt with by the other Articles of the tax treaty, Article 16A provides that the amount is taxable in Australia in accordance with Australian law.

Accordingly, the ETP will be assessable in Australia.