Private ruling: Death benefit
Date of advice: 8 May 2026
Published: 20 July 2026
Ruling period: Period ended XX June 20XX

Ruling: Q1: Is any part of the death benefit lump sum payment received by you from a Country A Fund, assessable as applicable fund earnings under section 305-70 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: The Deceased was a member of the Country A Fund. During the 20XX income year, you received a death benefit lump sum payment from the Country A Fund. You have been an Australian resident for taxation purposes for the entire period during which the Deceased's Country A Fund account was in existence. The foreign exchange rate on the date when the lump sum payment was received in Australia was $1 = X foreign currency. No further interest is retained in the Country A Fund. No information has been provided in relation to any contributions, or transfers from other foreign funds, into the Country A Fund during the period you were an Australian resident.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 307-5 | Income Tax Assessment Act 1997 section 305-70 | Income Tax Assessment Act 1997 section 305-75 | Income Tax Assessment Act 1997 section 307-65 | Income Tax Assessment Act 1997 section 960-50 | Income Tax Assessment (1997 Act) Regulations 2021 Regulation 960-50.01 Other relevant documents | ATO ID 2015/7: Foreign currency translation rules in working out 'applicable fund earnings' under section 305-75 of the ITAA 1997.

Reasons for decision: Detailed Reasoning - Death benefit -- applicable fund earnings: Section 307-65 of the ITAA 1997 defines a superannuation lump sum as a superannuation benefit that is not a superannuation income stream benefit. Section 307-5 includes in the definition of a superannuation benefit a payment to a taxpayer from a superannuation fund, after another person's death, because the other person was a member of the fund. The benefit payable by the Country A Fund will be a superannuation lump sum. Where a person receives a lump sum from a foreign superannuation fund more than six months after becoming an Australian resident, the growth accrued during their Australian residency is included in assessable income as 'applicable fund earnings' under section 305-70 of the ITAA 1997. The applicable fund earnings is the amount worked out under either subsection 305-75(2) or 305-75(3) of the ITAA 1997. In these provisions, the first use of 'you' refers to the death benefit recipient. In this case, you are the recipient. Accordingly, where the death benefit recipient was an Australian resident for the entire period to which the lump sum relates, subsection 305-75(2) applies. Where the death benefit recipient became an Australian resident during that period, subsection 305-75(3) applies. The period of Australian residence of the deceased fund member is not relevant in determining which subsection applies. In this case, the Deceased's interest in the Country A Fund to which the lump sum relates, was established when you were an Australian resident. As you were an Australian resident for the whole of the period to which the lump sum relates subsection 305-75(2) of the ITAA 1997 will apply. Subsection 305-75(2) of the ITAA 1997 states: If you were an Australian resident at all times during the period to which the lump sum relates, the amount of your applicable fund earnings is the amount (not less than zero) worked out as follows: (a) work out the total of the following amounts: (i) the part of the lump sum that is attributable to contributions made by or in respect of you on or after the day when you became a member of the fund (the start day ); (ii) the part of the lump sum (if any) that is attributable to amounts transferred into the fund from any other foreign superannuation fund during the period; (b) subtract that total amount from the amount in the fund that was vested in you when the lump sum was paid (before any deduction for foreign income tax); (c) add the total of all your previously exempt fund earnings (if any) covered by subsections (5) and (6). In the context of death benefit payments, some of the references to 'you' and 'your' in the legislation, which literally refer to the death benefit recipient, must be interpreted as referring to the deceased fund member to avoid anomalous outcomes in applying the methods in section 305-75 of the ITAA 1997. For the purposes of subparagraphs 305-75(2)(a)(i) and (ii) of the ITAA 1997, the relevant amounts are the contributions made to, and foreign fund transfers into the Fund, by or for the benefit of the Deceased, after the relevant recipient first became a resident. Paragraph 305-75(2)(c) of the ITAA 1997 requires you to 'add the total of all your previously exempt fund earnings (if any)'. This must be interpreted as if the amount of previous exempt fund earnings of the Deceased fund member are the previous exempt fund earnings of the death benefit recipient (you). As the Deceased does not have any previously exempt fund earnings, there is no amount to be included in the calculation of your applicable fund earnings when you receive your lump sum payment from the Fund. | Detailed Reasoning - Foreign currency conversion: The foreign currency translation rules for lump sums paid by foreign superannuation funds are explained in ATO Interpretative Decision ATO ID 2015/7: Foreign currency translation rules in working out 'applicable fund earnings' under section 305-75 of the ITAA 1997 (ATO ID 2015/7). For the purposes of working out your applicable fund earnings in relation to a superannuation lump sum under section 305-75 of the ITAA 1997, the correct rule for translating foreign currency into Australian dollars is the rule described in Item 11 of the table in subsection 960-50(6) of the ITAA 1997 (as modified by regulation 960-50.01(1) of the Income Tax Assessment (1997 Act) Regulations 2021 ). This means that the exchange rate at which it is reasonable to translate amounts into Australian currency for the purposes of section 305-75 of the ITAA 1997, is the exchange rate applicable at the time of receipt of the relevant superannuation lump sum directly by you or your complying superannuation fund. Specifically, under subsection 960-50(4) of the ITAA 1997, each amount or component that is denoted in a foreign currency must be translated into an Australian dollar equivalent first before any calculations are undertaken. | Detailed Reasoning - Applicable fund earnings calculation: As the Deceased became a member of the Country A Fund when you were a resident of Australia, applicable fund earnings on this lump sum will be worked out in accordance with subsection 305-75(2) of the ITAA 1997. Any amounts in pound sterling are translated into Australian dollars using the exchange rate applicable on the date of receipt of the relevant superannuation lump sum. In this case the relevant exchange rate was AUD $1 = X foreign currency. | Detailed Reasoning - Description: Amount in ( foreign currency) | Detailed Reasoning - A: Part of the lump sum attributable to contributions to the fund X $X | Detailed Reasoning - B: Part of the lump sum attributable to amounts transferred from foreign funds into the fund X $X | Detailed Reasoning - C: A + B (The step outlined in paragraph 305-75(2)(a) of the ITAA 1997) N/A $X | Detailed Reasoning - D: Amount in fund vested in you when the lump sum was paid XXX XXX | Detailed Reasoning - E: D - C (The step outlined in paragraph 305-75(2)(b)) XXX $XXX | Detailed Reasoning - F: All previously exempt fund earnings (if any) (The step outlined in paragraphs 305-75(2)(c)) X $X | Detailed Reasoning - G: E + F = Applicable Fund Earnings XXX $XXX The applicable fund earnings in respect of the lump sum paid to you from the Country A Fund is $xxx. You should include this amount in your assessable income for the 20XX income year.