Private ruling: Lump sum payment from a foreign superannuation fund
Date of advice: 14 October 2015
Published: October 2015
Ruling period: Income year ended 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: For the purposes of section 305-60 of the Income Tax Assessment Act 1997 (ITAA 1997), did you receive a superannuation lump sum from a foreign superannuation fund within six months after you become an Australian resident? | A1: No

Relevant facts and circumstances: You left Australia to live overseas some time ago. While living overseas, you became a member of an overseas defined benefit superannuation pension scheme (the Foreign Fund). During the 20XX-YY income year, you returned to Australia and became a resident of Australia for tax purposes. You requested the Foreign Fund to initiate the process to transfer the balance of your benefit in the Foreign Fund to an Australian complying superannuation fund (the Australian Fund). The trustee of the Australian Fund (the Trustee) is a company. You are the sole director of the Trustee. Just over 6 months after you became an Australian resident, you received a cheque, in your capacity as the director of the Trustee, equal to the balance of your benefit in the Foreign Fund. The following day, the cheque was deposited by the Trustee into the Australian Fund's bank account. The Foreign Fund is considered to be a superannuation fund for the purposes of Subdivision 305-B of the ITAA 1997.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 305-60

Reasons for decision: Summary: You did not receive the lump sum payment from the Foreign Fund within six months after becoming an Australian resident; therefore section 305-60 of the ITAA 1997 does not apply to the payment. Consequently, lump sum payment received from the Foreign Fund is not non-assessable and is not non-exempt income. That is, it is not tax free. | Detailed Reasoning - Lump sums tax free - foreign resident period: Section 305-60 of the ITAA 1997 provides that a lump sum payment you receive from a foreign superannuation fund is not assessable income and is not exempt income if all the following conditions are met: a. You receive it within 6 months after you become an Australian resident; and b. It relates only to a period: i. when you were not an Australian resident; or ii. starting after you became an Australian resident and ending before you receive the payment; and c. it does not exceed the amount in the fund that was vested in you when you received the payment. Section 307-15 of the ITAA 1997 applies to treat a superannuation lump sum as received by you when it is made (a) for your benefit, or (b) to another person or to an entity at your direction or request. For section 305-60 of the ITAA 1997 to apply, each of the requirements specified in paragraphs (a), (b) and (c) of that section must be satisfied. | Detailed Reasoning - Payment received within 6 months of becoming an Australian resident: You became an Australian resident for tax purposes during the 20XX-YY income year, therefore, to satisfy the six month condition in paragraph 305-60(a) of the ITAA 1997, you must have received the superannuation lump sum payment from the Foreign Fund within 6 months of becoming an Australian resident. When, as here, the payment is made by a cheque, the payment is taken to have been received when the cheque is received by the Trustee, unless the cheque is subsequently dishonoured. In this case, the cheque from the Foreign Fund was received by the Trustee a few days after the 6-month residency period ended and promptly presented on the following day. As the cheque was subsequently cleared, the superannuation lump sum payment was, in fact, received by the Trustee (for your benefit) on the date you received the cheque. As such, you are taken to have received the benefit from the Foreign Fund more than 6 months after becoming an Australian resident. As you did not receive the payment within 6 months of becoming an Australian resident, you fail the requirement in paragraph 305-60(a) of the ITAA 1997. Therefore, section 305-60 of the ITAA 1997 does not apply to treat the payment as tax free. | Detailed Reasoning - Other relevant comments: As stated above, for section 305-60 of the ITAA 1997 to apply, each of the requirements specified in paragraphs (a), (b) and (c) of that section must be satisfied. Therefore, even if paragraph (a) was satisfied in this case, the payment would fail paragraph (b) because the payment relates to a period when you were both a non-resident and a period when you were a resident.