Private ruling: Lump sum and regular payments
Date of advice: 4 September 2025
Published: 27 October 2025
Ruling period: Year ended 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is any part of a lump sum payment to you from the fund applicable fund earnings under section 305-75 of the ITAA 1997? | A1: Yes. | Q2: Are the regular pension payments you receive included in your assessable income? | A2: Yes.

Relevant facts and circumstances: You joined the fund (the fund) on Date one. You ceased employment in Country A on Date 2. You arrived in Australia on Date 3. You became an Australian resident for tax purposes on or about Date 4. On Date 5, you received a lump sum payment from the fund. An amount was deposited into your Australian bank account. The exchange rate for this transaction was provided. At the time of the lump sum payment, you commenced receiving a monthly pension. You have provided the amount of the monthly pension when you left Country A. Increases to the payments have been made since then and you have provided the current annual amount. You have not made any contributions to the fund since arriving in Australia. No amounts have been transferred into the fund from any other foreign superannuation fund since you became an Australian resident. The value of the total benefits you held in the fund (together with other overseas interests such as foreign life assurance policies) was $X or less. Member benefits paid from the fund cannot be accessed other than at retirement, death or incapacity.

Relevant legislative provisions: Income Tax Assessment Act 1997 >section 6-5 | Income Tax Assessment Act 1997 section 6-10 | Income Tax Assessment Act 1997 section 305-70 | Income Tax Assessment Act 1997 section 305-75< | Income Tax Assessment Act 1997 subsection 960-50 (1) | Income Tax Assessment Act 1997 subsection 995-1(1) | Income Tax Assessment Act 1936 section 27H

Reasons for decision: Detailed Reasoning - Tax treatment for the lump sum payments received from overseas fund: When a person receives a lump sum from a foreign superannuation fund more than six months after they became an Australian resident, the growth they earned on their foreign superannuation during the period when they were a resident of Australia is included in their assessable income as 'applicable fund earnings' under section 305-70 of the ITAA 1997. A foreign superannuation fund is defined in subsection 995-1(1) of the ITAA 1997 as being a fund that is not an Australian superannuation fund. A superannuation fund has the meaning given by subsection 10(1) of the Superannuation Industry (Supervision) Act 1993 , which requires that the fund is a 'provident, benefit, superannuation or retirement fund'. In section 62 of the SISA, a regulated superannuation fund must be 'maintained solely' for the 'core purposes' of providing benefits to a member when the events occur: • on or after retirement from gainful employment; or • attaining a prescribed age; and • on the member's death. (this may require the benefits being passed on to a member's dependants or legal representative). The Commissioner's view is that for a fund to be classified as a superannuation fund, it must exclusively provide a narrow range of benefits that are characterised by some specific future purpose. That is, the payment of superannuation benefits upon retirement, invalidity or death of the individual or as specified under the SISA. In this case, the benefits from the fund primarily cannot be accessed other than at retirement, death or incapacity and therefore it meets the definition of a foreign superannuation fund. | Detailed Reasoning - Applicable Fund Earnings: The applicable fund earnings amount is worked out in, relation to a lump sum paid from a foreign superannuation fund, under either subsection 305-75(2) or subsection 305-75(3) of the ITAA 1997. Subsection 305-75(2) of the ITAA 1997 applies where the person was an Australian resident at all times during the period to which the lump sum relates. Subsection 305-75(3) of the ITAA 1997 applies where the person was not an Australian resident at all times during the period to which the lump sum relates. For subsection 305-75(2) and subsection 305-75(3) of the ITAA 1997, the period to which the lump sum relates is the period during which funds are accumulated in a particular foreign superannuation fund for a member that has a relation to the superannuation lump sum paid by that fund. That is consistent with other parts of those subsections, which also focus on the foreign superannuation fund from which the lump sum is paid. Subsection 305-75(3) of the ITAA 1997 states, if you become an Australian resident after the start of the period to which the lump sum relates (but before you receive it), the amount of your applicable fund earningsis the amount (not less than zero) worked out as follows: a) work out the total of the following amounts: i. the amount in the fund that was vested in you just before the day (the start day ) you first became an Australian resident during the period; ii. the part of the payment that is attributable to contributions to the fund made by or in respect of you during the remainder of the period; iii. the part of the payment (if any) that is attributable to amounts transferred into the fund from any other *foreign superannuation fund during the remainder of 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 tax); c) multiply the resulting amount by the proportion of the total days during the period when you were an Australian resident; d) add the total of all previously exempt fund earnings (if any) covered by subsections (5) and (6). You became an Australian resident before the start of the period to which the lump sum relates. You remained an Australian resident at all times until the lump sum was paid. Therefore, the applicable fund earnings is calculated in accordance with subsection 305-75(3) of the ITAA 1997. | Detailed Reasoning - A proportionate approach is allowed: It is the Commissioner's view that where an individual commences a pension from the foreign superannuation fund at the same time as the superannuation lump sum is paid from the fund, subsection 305-75(3) of the ITAA 1997 is applied having regard only to the individual's lump sum entitlement. That is, regard is had only to so much of each of the relevant vested amounts that was, at the relevant times, payable as a lump sum. The part of the vested amount that relates to the pension is disregarded. This approach ensures that the individual is not assessed on earnings that have, in effect, accrued in relation to the pension that will be paid from the foreign superannuation fund. This is consistent with the Commissioner's view in ATO ID 2012/49: Superannuation lump sum paid from a foreign superannuation fund to an Australian resident at the same time as an annuity commenced: applying section 305-75 of the ITAA 1997. As you received a lump sum amount that was a portion of your interest in the foreign fund, this proportion will be used to calculate the applicable fund earnings in relation to the lump sum amount received. | 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 11A 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 you became a member of the fund before you became a resident of Australia, applicable fund earnings on this lump sum will be worked out in accordance with subsection 305-75(3) of the ITAA 1997. Any amounts in the relevant currency are translated into Australian dollars using the exchange rate applicable on the date of receipt of the relevant superannuation lump sum, directly by you, on Date 5. The lump sum payment was valued at $X on the day before residency date. The growth in the lump sum amount was $X. The applicable fund earnings in respect of the lump sum paid to you from the fund is $X. | Summary: The regular payments you receive are included in your assessable income. | Detailed Reasoning - Detailed reasoning: As an Australian resident your assessable income includes ordinary and statutory income from all sources, whether in or out of Australia (section 6-5 and 6-10 of the ITAA 1997). Section 27H of the Income Tax Assessment Act 1936 (ITAA 1936) provides that annuities and pensions paid from foreign superannuation funds or foreign pension schemes to provide superannuation benefits are included in assessable income. Subsection 995-1(1) of the ITAA 1997 provides that a foreign superannuation fund is a superannuation fund that is not an Australian superannuation fund. A superannuation fund has the meaning given by subsection 10(1) of the Superannuation Industry (Supervision) Act 1993, which requires that the fund is a 'provident, benefit, superannuation or retirement fund. | Detailed Reasoning - Application to your circumstances: As outlined in Question 1, the fund in question meets the definition of a superannuation fund and as it is not an Australian superannuation fund it is a foreign superannuation fund. Accordingly, the pension you receive is assessable income in accordance with section 27H of the ITAA 1936. In determining your liability to pay tax in Australia it is also necessary to consider the operation of any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and the ITAA 1997 where there are inconsistent provisions (except in some limited situations). The Convention between the Government of Australia and the Government of Country A for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains (the Convention) operates to avoid the double taxation of Australian and Country A residents. Article 17 of the Convention provides that a pension will only be taxable in the country of residence of the recipient. As you are a resident of Australia, the pension you receive from the fundis taxed only in Australia under Article 17 of the XX Convention and is assessable in Australia under section 27H of the ITAA 1936. Therefore, the regular pension payments you receive are included in your assessable income.