Private ruling: Lump sum payment/foreign trust
Date of advice: 1 October 2025
Published: 24 November 2025
Date scheme commenced: X July 202X.

Ruling: Q1: Will the receipt of the lump sum payment from the foreign trust result in section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) applying such that the lump sum received is considered statutory income? | A1: Yes. | Q2: Will receipt of the lump sum payment from the foreign trust be included in your assessable income pursuant to section 99B of the Income Tax Assessment Act 1936 (ITAA 1936)? | A2: Yes. | Q3: Is the amount of the lump sum payment from the foreign trust, that is included in your assessable income, reduced by the part of the payment that represents corpus of the trust (except to the extent it relates 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 of a year of income) under paragraph 99B(2) of the ITAA 1936? | A3: Yes. | Q4: Is the lump sum payment from the foreign trust included in your assessable income in the income year in which you receive it? | A4: Yes. This private ruling applies for the following period: Year ending X June 202X. The scheme commenced on: X July 202X.

Relevant facts and circumstances: You are a dual citizen of Australia and Country B. You have been a resident of Australia for taxation purposes since 20XX. Between 20XX and 20XX, you were working in Country B for a company before returning to Australia. While in Country B, you established a foreign trust (the plan). The plan allows for your spouse to make contributions to the plan. The funds in the plan can be used for your retirement or other projects. The balance of the fund consists of entities from Country B. Assumption For the purpose of this ruling, it is assumed you will transfer the funds from the foreign trust before XX June 20XX.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 99B | Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 6-10

Reasons for decision: Detailed Reasoning - Detailed reasoning: Assessable income consists of ordinary income and statutory income. 'Ordinary income' is defined in section 6-5 of the ITAA 1997 but in broad terms means income according to ordinary concepts. Typical examples of this include interest and wages. Ordinary income has generally been held to include three categories, namely, income from rendering personal services, income from property and income from carrying on a business. Case law on the topic has identified various factors which may be relevant in determining whether an amount is income according to ordinary concepts. These include: • whether the amount has the characteristics of periodicity, recurrence or regularity • whether it is convertible into money or money's worth • whether it is associated with business activities or services rendered, as distinct from the mere sale of property, and • whether it is solicited, as distinct from a windfall. Although not exhaustive or conclusive, the presence of these factors will assist in a conclusion that the amount is more likely to be ordinary income. | Detailed Reasoning - Statutory income: 'Statutory income' is defined in section 6-10 of the ITAA 1997 but in broad terms it means amounts which are not ordinary income but are treated as assessable income by virtue of a provision in ITAA 1997. The assessable income of an Australian resident will include statutory income from all sources, whether in or out of Australia. As with ordinary income, the assessability of statutory income is affected by the residence status of the person who derives it. | Detailed Reasoning - Application to your circumstances: The lump sum you will receive is from a foreign source but will be received by you while you are an Australian resident for taxation purposes. The payment will be received as a 'one off' payment such that it will not have the characteristics of regularity or recurrence. To that end, the lump sum payment you will receive from the RRSP will not be ordinary income but will be assessable by virtue of another provision of the ITAA 1997. | Summary: You will receive a lump sum payment from the plan as a beneficiary whilst you are an Australian resident for taxation purposes. The lump sum payment is considered assessable income and will need to be included in your tax return; however, the proportion of the withdrawal that represents amounts previously deposited to the plan is excluded from your assessable income. | Detailed Reasoning - Detailed reasoning: Generally, 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 a lump sum payment 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. 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. Paragraphs 99B(2)(a) and (b) of the ITAA 1936 require a hypothesis to be posited in order to determine if an amount distributed to an Australian beneficiary is assessable under subsection 99B(1). The hypothesis, posited for paragraph 99B(2)(a), is that the amounts derived by the trustee were, instead, derived by a hypothetical resident taxpayer. The question premised on this hypothesis is whether the amounts would be included in the assessable income of that hypothetical resident taxpayer. 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 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). | Detailed Reasoning - Application to your circumstances: You will transfer the funds available in the plan to you as an Australian resident for tax purposes in the 20XX financial year. The lump sum payment will be paid to you, and to the benefit of you, as a 'one-off' payment. You will need to include in your tax return the distribution amount and exclude the amount that represents corpus of the plan. The proportion of the withdrawal that represents earnings of the plan (from the commencement date of the plan) is included in your assessable income as the plan earnings are amounts that are not taken to represent corpus, as the earnings are attributable to income derived by the plan which would have been subject to tax had the earnings been derived by a resident taxpayer. | Summary: The taxing point for the receipt of the lump sum payment received from the plan is the point when it is received by you as a result of the transfer of the funds. | Detailed Reasoning - Detailed reasoning: Assessable income includes ordinary income "derived" by the taxpayer during the income year pursuant to section 6-5(2) of the ITAA 1997. Income is taken to be "derived" when it is received by the taxpayer. Subsection 6-10(3) of the ITAA 1997 further provides that if an amount would be statutory income apart from the fact that it has not been received, it becomes statutory income as soon as it is applied or dealt with in any way on the taxpayer's behalf or as they direct. Section 6-5(2) and section 6-10(3) of the ITAA 1997 operate the same way such that the income is 'applied' or 'dealt with' on the day it is received by the taxpayer. | Detailed Reasoning - Application to your circumstances: You will transfer the funds available in the plan in the 20XX financial year. You will be taken to 'receive' or 'derive' the funds at the time it is successfully transferred to you. The taxing point is therefore the day you receive it.