Private ruling: Assessable income - foreign sourced income
Date of advice: 1 October 2025
Published: 24 November 2025
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Does the Country X Insurance Fund meet the definition of a foreign superannuation fund as per section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No. | Q2: Does the Country X Pension Fund meet the definition of a foreign superannuation fund as per section 995-1 of the ITAA 1997? | A2: Yes. Issue 2 - assessment of withdrawals | Q3: Will the payment from the Pension Fund be excluded from your assessable income pursuant to section 305-60 of the ITAA 1997? | A3: Yes. | Q4: Will you be assessed on withdrawals from the Insurance Fund under section 99 B of the Income Tax Assessment Act 1936 (ITAA 1936)? | A4: Yes. Issue 3- assessable income - sale of shares | Q5: Will any capital gains or losses from selling shares held overseas while you are a tax resident of Australia be included in your assessable income? | A5: Yes.

Relevant facts and circumstances: You are an Australian Citizen. You are a tax resident of Australia. On DD MM 20 XX, you retired from your employment in Country X. On DD MM 20XX, you returned to live in Australia permanently. You first entered the workforce in Country X more than X years ago, prior to 20XX, you spent time living and working in Australia. In Country X, the Pension Fund is a mandatory retirement savings system for employees. The Pension System refers to the system under which an employer is legally obligated to provide retirement pensions to a worker. Under the Relevant Act members can withdraw their benefits: • upon reaching X years of age • under X years of age but has become unable to work due to disability. The X benefits of Insurance is a social insurance benefit that provides retirement income to employees who contribute to the Insurance Program. The Insurance Fund is provided for by the Relevant Act . Other benefits included: • Loans to insured person in certain circumstances - subparagraph (X), Paragraph X of article X of the Relevant Act. • Injury and sickness benefits • Maternity benefits • Hospitalisation benefits • An insured person who has insured in the same insured unit for over X years and resigns. While living and working in Country X, you were a participant in the Insurance Fund. Since 20XX, your employer contributed X% of your monthly salary to the Insurance Fund. You provided us with a printout from the Relevant Department on DD MM 20XX, which references the employer contribution of X % for the period DD MM 20XX to DD MM 20XX. You did not make any employee contributions to the Insurance Fund. Your retirement Prior to your retirement and return to Australia you did the following: In MM 20XX, you applied for X benefits from the Insurance Fund. In MM 20XX, you asked the Relevant Department to provide you with an estimate of calculations for your Pension Fund and your Insurance Fund. You have provided us with a copy of these printouts. On DD MM 20XX, you applied for benefits under the Pension Fund. On DD MM 20XX, you received a lump sum payment of X from the Country X Pension Fund. You provided us with a copy of the letter issued to you by the Relevant Department. On DD MM 20XX, you received a lump sum payment of X from the Insurance Fund. You provided us with the letter issued DD MM 20XX by the Relevant Department which provides the lump sum payment was calculated as follows: • Average monthly salary X (calculated based on the insured salary for the last X months from the month of retirement) • Number of months of benefit: X months • Benefit amount X. • Years of insurance X years and X months. Shares In early 20XX, prior to leaving Country X, you purchased Company Y shares. These were sold in MM and MM 20XX. Interest You currently earn interest on funds held in your Country X based bank account.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 6-10 | Income Tax Assessment Act 1936 section 99B | Income Tax Assessment Act 1997 section 118-300 | Income Tax Assessment Act 1997 subsection 295-95(2) | Income Tax Assessment Act 1997 section 305-70 | Income Tax Assessment Act 1997 section 305-75 | Income Tax Assessment Act 1997 subsection 995-1(1) | Supe rannuation Industry (Supervision) Act 1993 subsection 10(1) | Supe rannuation Industry (Supervision) Act 1993 section 62

Reasons for decision: Detailed Reasoning - Question 1: Does the Country X Insurance Fund meet the definition of a foreign superannuation fund as per section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | Detailed Reasoning - Answer: No. | Detailed Reasoning - Question 2: Does the Country X Pension Fund meet the definition of a foreign superannuation fund as per section 995-1 of the Income Tax Assessment Act 1997 ? | Detailed Reasoning - Answer: Yes. | Summary: Member benefits paid from the Country X Pension Fund cannot be accessed other than at retirement, death or incapacity. Therefore, the Fund meets the definition of foreign superannuation fund. However, as the benefits were paid to you prior to becoming an Australian resident, they are excluded from assessable income under section 305-60 of the ITAA 1997. The Insurance Fund satisfies some of the requirements of a foreign superannuation fund, however in general the Insurance Fund is not exclusively a provident, benefit or superannuation fund because it does not provide benefits for the specific future purposes of the individual's retirement. Members can withdraw benefits for sickness, maternity and loans. In other words, the Insurance Fund provides for the payment of benefits for reasons other than retirement and not solely (that is, exclusively) for retirement purposes. Accordingly, the lump sum benefit of X from the Insurance Fund will not be a payment from a foreign superannuation fund and section 305-70 of the ITAA 1997 will not have any application. The payment will instead be assessable under section 99B of the ITAA 1997. | Detailed Reasoning - Lump sum payments received from certain foreign superannuation funds: Subdivision 305-B of the ITAA 1997 sets out the tax treatment of superannuation lump sum benefits paid from foreign superannuation funds and other foreign schemes for the payment of similar retirement or death benefits, as defined in section 305-55 of the ITAA 1997. Before determining whether an amount is assessable income under subdivision 305-B of the ITAA 1997, it is necessary to determine whether the payment is being made from a foreign superannuation fund. If the entity making the payment is not a foreign superannuation fund (or scheme for the payment of superannuation benefits), Subdivision 305-B will not apply to the payment. | Detailed Reasoning - Tax treatment for the lump sum payments received from overseas fund: Section 305-70 of the ITAA 1997 provides that where the Taxpayer receives a lump sum from a foreign superannuation fund more than six months after becoming an Australian resident, they include the 'applicable fund earnings' of the lump sum (if any) in their assessable income. Applicable fund earnings are worked out under section 305-75 of the ITAA 1997. If the entity making the lump sum payment is not a foreign superannuation fund, then section 305-70 of the ITAA 1997 will not have any application. | Detailed Reasoning - Meaning of 'foreign superannuation fund': A 'foreign superannuation fund' is defined in subsection 995-1(1) of the ITAA 1997 as follows: (a) a superannuation fund is a foreign superannuation fund at a time if the fund is not an *Australian superannuation fund at that time; and (b) a superannuation fund is a foreign superannuation fund for an income year if the fund is not an Australian superannuation fund for the income year. 1. Relevantly, subsection 295-95(2) of the ITAA 1997 defines 'Australian superannuation fund' as follows: 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 that 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 interests 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. A superannuation fund that is established outside of Australia and has its central management and control outside of Australia would qualify as a foreign superannuation fund. The fact that some of its members may be Australian residents would not necessarily alter this. | Detailed Reasoning - Meaning of 'superannuation fund': 'Superannuation fund' is defined in subsection 995-1(1) of the ITAA 1997 as having the meaning given by section 10 of the Superannuation Industry (Supervision) Act 1993 (SISA). Subsection 10(1) of the SISA states: superannuation fund means: (a) a fund that: (i) is an indefinitely continuing fund; and (ii) is a provident, benefit, superannuation or retirement fund; or (b) a public sector superannuation scheme. | Detailed Reasoning - Meaning of 'provident, benefit, superannuation or retirement fund': Whether the Plan is a foreign superannuation fund requires consideration of the meaning of the term 'provident, benefit, superannuation or retirement fund' in subsection 10(1) of the SISA. Each of these terms are not defined in the ITAA 1936, ITAA 1997, the SISA or elsewhere in the tax acts. Accordingly, those terms will derive their meaning from their ordinary meaning and the relevant case law. In the context of considering the term 'provident, benefit or superannuation fund established for the benefit of employees', in former subparagraph 23(j)(i) of the ITAA 1936, the Full Bench of the High Court in Mahony v Commissioner of Taxation (Cth) (1967) 41 ALJR 232; (1967) 14 ATD 519 ( Mahony ) considered that this phrase denoted 'a purpose narrower than the conferral of benefits in a completely general sense' and had to be characterised by 'some specific future purpose'. In the case of a provident fund, against 'contemplated contingencies; in the case of a superannuation fund 'on retirement, death or cessation of employment'; and, in the case of a benefit fund 'a benefit characterised by some specific future purpose' (e.g. a funeral fund). Furthermore, Justice Kitto's judgement in Mahony indicated that a fund does not satisfy any of the three provisions, that is, either a 'provident, benefit or superannuation fund', if there exist provisions for the payment of benefits 'for any other reason whatsoever'. A similar approach was also adopted by Taylor J and Windeyer JJ in Mahony who said: ...In other words, if they could, keeping within the terms of the trust, apply the fund or any portion thereof to purposes foreign to the true purposes of such a fund, then it would not be such a fund. Accordingly, the purpose of the fund must be solely consistent with it being a 'provident, benefit or superannuation fund'. [1] Similar observations have been made in a number of other authorities. [2] In the context of what constitutes a 'superannuation fund' and a 'fund', Justice Windeyer in Scott v. Federal Commissioner of Taxation (No. 2) (1966) 10 AITR 290; (1966) 40 ALJR 265; (1966) 14 ATD 333emphasised the 'sole purpose' requirement, stating: ...I have come to the conclusion that there is no essential single attribute of a superannuation fund established for the benefit of employees except that it 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. In this connexion "fund", I take it, ordinarily means money (or investments) set aside and invested, the surplus income therefrom being capitalised. I do not put this forward as a definition, but rather as a general description. More recently, in considering the term 'provident, benefit, superannuation or retirement fund' as it now appears in the definition of 'superannuation fund' in subsection 10(1) of the SISA, Senior Member FD O'Loughlin in Baker v. FC of T [2015] AATA 469 (Baker) stated at [16]: Accordingly, a trust arrangement that is not a provident fund, benefit fund or retirement fund, that allows for payment of superannuation styled benefits and other benefits not permitted by the Supervision Act will not be a superannuation fund. Whilst the Senior Member in Baker made reference to 'benefits not permitted by the Supervision Act' in the context of considering whether a particular fund which was not a 'provident, benefit or retirement fund' was a 'superannuation fund', it is noted that section 62 of the SISA largely replicates the relevant case law and requires the fund be 'maintained solely' for one or more of the 'core purposes' of providing benefits to a member when the events occur: • on or after retirement from gainful employment; • attaining a prescribed age; or • on the member's death (this may require the benefits being passed on to a member's dependants or legal representative). Whether a fund has been established for the requisite purpose required, is determined by considering the terms of the trust deed. This is an objective determination, and it is not determined by the subjective intentions of the parties. [3] Whether a particular arrangement constitutes a superannuation fund is dependent upon the facts and circumstances of the case. Regard is had to the terms of the constituent arrangements and what the relevant trustee can and cannot do, and is and is not obliged to do, with the trust assets and property. [4] As Taylor and Windeyer JJ observed in Mahony : It thus becomes necessary to look carefully and critically at the terms of the trust deed, at what is required and what is permitted - that is to say in what ways the trustees might, without any breach of the trusts it imposes, apply the trust property. In the present case, the Insurance Fund allows a member to withdraw benefits in the following circumstances: • Loans to insured person in certain circumstances - article X of the Relevant Act. • Injury and sickness benefits • Maternity benefits • Hospitalisation benefits The Insurance Fund satisfies some of the requirements of a foreign superannuation fund, however in general the Insurance Fund is not exclusively a provident, benefit or superannuation fund because it does not provide benefits for the specific future purposes of the individual's retirement. Members can withdraw benefits for sickness, maternity and loans. In other words, the Insurance Fund provides for the payment of benefits for reasons other than retirement and not solely (that is, exclusively) for retirement purposes. Accordingly, the lump sum benefit of X from the Insurance Fund will not be a payment from a foreign superannuation fund and section 305-70 of the ITAA 1997 will not have any application. The payment will instead be assessable to the taxpayer under section 99B of the ITAA 1936. Member benefits paid from the Pension Fund cannot be accessed other than at retirement, death or incapacity. Therefore, the Fund meets the definition of foreign superannuation fund. However, as the benefits were paid to you prior to becoming an Australia resident, they are excluded from assessable income under section 305-60 of the ITAA 1997. | Detailed Reasoning - Question 3: Will the payment from the Pension Fund be excluded from assessable income pursuant to section 305-60 of the ITAA 1997? | Detailed Reasoning - Answer: Yes. | Detailed Reasoning - Question 4: Will you be assessed on withdrawals from the Insurance Fund under section 99 B of the Income Tax Assessment Act 1936 (ITAA 1936)? | Detailed Reasoning - Answer: Yes. | Summary: Section 99B of the Income Tax Assessment Act 1936 (ITAA 1936) will apply to tax you on amounts that represent earnings in the Insurance Fund. The amount that represents the corpus of your Insurance Fund includes any amounts previously deposited into the fund by you and your employers. The amount you withdraw from your retirement fund may also include amounts that represent earnings of the fund. | Detailed Reasoning - Detailed reasoning: The Insurance Fund does not meet the definition of a foreign superannuation fund, however, amounts received from the Insurance Fund are subject to section 99B of the ITAA 1936. Broadly, section 99B of the ITAA 1936 deals with the receipt of trust amounts that have not previously been subject to tax in Australia. It applies where an Australian resident for tax purposes receives payments from a foreign trust. Subject to subsection 99B(2) of the ITAA 1936, subsection 99B(1) requires an Australian beneficiary to include in their assessable income an amount of trust property that is paid to, or applied for their benefit, provided the Australian beneficiary was resident at any time during the income year in which the payment or application was made. However, subsection 99B(2) of the ITAA 1936 reduces the amount included in assessable income under subsection 99B(1) by: • for paragraph 99B(2)(a) - so much of the amount as represents corpus of the trust estate, except to the extent to which it is attributable to amounts derived by the trust estate that, if they had been derived by a taxpayer being a resident, would have been included in the assessable income of that taxpayer for a year of income, and • for paragraph 99B(2)(b) - so much of the amount as represents an amount that, if it had been derived by a taxpayer being a resident, would not have been included in the assessable income of that taxpayer of a year of income. Taxation Determination TD 2024/9 Income tax: factors taken into account in applying paragraphs 99B(2)(a) and (b) of the Income Tax Assessment Act 1936 explains that corpus, in the context in which it is used in section 99B of the ITAA 1936 refers to trust capital which is represented by the assets of the trust, excluding income which has not been accumulated. In determining whether an amount distributed represents corpus, for the purposes of paragraph 99B(2)(a), regard is had to the trust property distributed. The accounting records of the trust may assist in evidencing this but are not determinative of what the amount represents. Accumulated income (for example, bank interest or share dividend income) is included in corpus, but it will be corpus which is attributable to amounts which would be included in assessable income if derived by a hypothetical resident taxpayer. Accordingly, the amount assessed under subsection 99B(1) of the ITAA 1936 will not be reduced by an amount attributable to accumulated income under paragraph 99B(2)(a). Please refer to Practical Compliance Guideline PCG 2024/3 Section 99 B of the Income Tax Assessment Act 1936 - ATO compliance approach for additional information on evidential and record keeping requirements in relation to foreign trust distributions (paragraphs 32 to 61). For further information about the Practical Compliance Guideline, please visit the Legal Database on the ATO website ato.gov.au and search for PCG 2024/3. Section 770-10 of the ITAA 1997 provides that a foreign income tax offset can be claimed for foreign income tax paid by a taxpayer in respect of an amount that is included in their assessable income. The taxpayer must have paid the foreign income tax before an offset is available. A taxpayer is deemed to have paid the foreign income tax if the foreign tax has been withheld from the income at its source. | Detailed Reasoning - Application to your circumstances: In your case, you withdrew the entirety of the funds in your Insurance Fund which includes amounts that represent the corpus of the trust. The amount that represents corpus includes amounts previously deposited with the Fund by your employer(s). You told us you have not made any employee contributions. The amount of the lump sum may include amounts that represent earnings. Earnings of the trust are not taken to represent corpus, as the earnings are attributable to income derived by the Fund which would have been subject to tax had the earnings been derived by a resident taxpayer. Therefore, section 99B of the ITAA 1936 applies to you so that: • the proportion of the amounts you have received and that represent amounts previously deposited with the Fund by you and your employer are excluded from your assessable income, and • the proportion of the amounts you have received and that represent earnings (from the date you commenced with the Fund) are included in your assessable income. | Detailed Reasoning - Question 5: Will any capital gains or losses from selling shares held overseas while you are a tax resident of Australia be included in your assessable income? | Detailed Reasoning - Answer: Yes. | Summary: As an Australian resident, you must declare income you earn anywhere in the world in your Australian tax return. This is known as your worldwide income. Australian residents make a capital gain or capital loss if a Capital Gains Tax (CGT) event happens to any of their assets anywhere in the world. | Detailed Reasoning - Detailed reasoning: If you acquired an overseas asset before you became an Australian resident, you treat the asset as though you acquired it when you became an Australian resident for their market value at that time. This is sometimes called 'deemed acquisition'. Similarly, if you stop being an Australian resident while holding an overseas asset, you treat the asset as though you disposed of it when you stopped being an Australian resident. Section 855-45 of the ITAA 1997 applies so that your capital gains tax (CGT) assets will be assessable under Parts 3-1 and 3-3 of the ITAA 1997 (including any foreign shares and stocks) with the first element of the cost base of your assets being the market value at that time. In your case, your deemed acquisition date will be 27 April 2024 if you held foreign assets prior to that date. You will not be eligible for the 50 % CGT discount if you disposed of these assets within 12 months of the deemed acquisition date. [1] See further the discussion of Member McCaffrey in Case R49 16 TBRD 219 at 221-222 as to whether an employee benefit fund was a 'provident, benefit or superannuation fund'. [2] Cameron Brae Pty Ltd v Federal Commissioner of Taxation (2007) 161 FCR 468; Compton v Federal Commissioner of Taxation (1966) 116 CLR 233; W alstern Pty Ltd v. Commissioner of Taxation (2003) 138 FCR 1. [3] Brynes v. Kendle [2011] HCA 26 at [115]. [4] Baker at [12]; see also Raymor Contractors Pty Ltd v. Federal Commissioner of Taxation (1991) 91 ATC 4259.

Issue 1 Foreign sourced income: Assessable income - Lump sum payments