ATO ID 2006/30: Assessability of a preserved superannuation benefit paid to a New Zealand resident taxpayer
Date of decision: 2 February 2005
Year of income: Year ended 30 June 2005
Business line: Public Groups and International

Issue
Is the payment of a preserved superannuation benefit to a New Zealand resident taxpayer assessable under subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997) where it constitutes assessable income under section 26AFB of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision
Yes. The payment of a preserved superannuation benefit to a New Zealand resident taxpayer, which constitutes assessable income under section 26AFB of the ITAA 1936, is assessable to the taxpayer under subsection 6-10(5) of the ITAA 1997.

Facts
The taxpayer is a resident of New Zealand for tax purposes. The taxpayer has received payment of a preserved superannuation benefit from an Australian complying superannuation fund under an early access arrangement. The preserved superannuation benefit received by the taxpayer is assessable income under section 26AFB of the ITAA 1936.

Reasons for decision
Summary: Subsection 6-10(5) of the ITAA 1997 provides that a foreign resident taxpayer's assessable income includes statutory income from all Australian sources and other statutory income included by a provision on a basis other than having an Australian source. Subsection 995-1(1) of the ITAA 1997 defines foreign resident to mean a person who is not a resident of Australia for the purposes of the ITAA 1936. Section 10-5 of the ITAA 1997 lists the provisions in the ITAA 1936 and ITAA 1997 which are about assessable income. Included in this list is section 26AFB of the ITAA 1936, which provides that benefits from certain older superannuation funds are included in assessable income. The taxpayer is a resident of New Zealand, a country with which Australia has entered into a tax treaty. Therefore, the tax treaty between Australia and New Zealand (the New Zealand Agreement) contained in Schedule 4 of the International Tax Agreements Act 1953 (the Agreements Act) must be considered in determining whether the preserved superannuation benefit paid to the New Zealand resident taxpayer, which is assessable income under section 26AFB, is assessable to the taxpayer under subsection 6-10(5) of the ITAA 1997. Subsection 6B(1A) of the Agreements Act gives the New Zealand Agreement the force of law in Australia. Subsection 4(1) of the Agreements Act provides that the ITAA 1936 and ITAA 1997 must be read as one with the Agreements Act. The taxpayer has received payment of a preserved superannuation benefit from a complying Australian superannuation fund. Therefore, the payment has an Australian source. There are no specific Articles in the New Zealand Agreement that deal with such payments, therefore Article 22 of the New Zealand Agreement will apply. Article 22 of the New Zealand Agreement provides that items of income which are not specifically mentioned in the New Zealand Agreement that are received by a resident of New Zealand are taxable only in New Zealand. However, if the income is derived from sources in Australia, it may also be taxed in Australia. Therefore, the payment may be taxed in New Zealand and Australia. Accordingly, the payment of a preserved superannuation benefit to the New Zealand resident taxpayer, that is assessable income under section 26AFB of the ITAA 1936, is assessable to the taxpayer under subsection 6-10(5) of the ITAA 1997 and subject to tax in Australia.

Legislative references: Income Tax Assessment Act 1997 subsection 6-10(5) section 10-5 subsection 995-1(1)
Subject references: New Zealand Double tax agreements International tax Superannuation