Private ruling: Lump sum payments from foreign superannuation funds
Date of advice: 20 May 2016
Published: July 2016
Ruling period: Income year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Does the Commissioner have discretion to extend the six month period referred to in section 305-65 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No.

Relevant facts and circumstances: A person (the Taxpayer) is over 50 years of age. The Taxpayer was employed overseas from 20XX to 20YY. While working overseas, the Taxpayer became a member of an overseas superannuation fund (the Fund). The Taxpayer's employment overseas was terminated in 20YY, and the Taxpayer returned to Australia on or about the same date. The Taxpayer had intended to transfer their superannuation benefits from the Fund to their Australian superannuation fund within six months of terminating their employment overseas. However, in accordance with the Fund's rules, where a member, who is not a citizen, permanently leaves the overseas country they cannot withdraw their superannuation benefits until the earlier of: a) one year after leaving their employer; or b) the member reaches the age of 55. Consequently, the Taxpayer is not able to transfer their benefits from the Fund to their Australian superannuation fund until 12 months after the termination of their employment; that is, 20ZZ. The Fund is a foreign superannuation fund for the purposes of Subdivision 305-B of the ITAA 1997. The Taxpayer was a resident of Australia for tax purposes during the period of employment overseas.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 305-B | Income Tax Assessment Act 1997 section 305-65 | Income Tax Assessment Act 1997 section 305-70

Reasons for decision: Summary: The Commissioner does not have discretion to extend the period in paragraph 305-65(1)(d) of the ITAA 1997 to a date that is more than six months after the termination of the Taxpayer's employment overseas. In addition, lump sum payment the Taxpayer would expect to receive from the Fund in 20ZZ would not relate only to the period of their employment overseas. Consequently, section 305-65 of the ITAA 1997 does not apply in this case and lump sum payment would be assessable under section 305-70 of the ITAA 1997 instead. | Detailed Reasoning - Lump sum payments transferred from foreign superannuation funds: The tax treatment of superannuation lump sums received by a resident taxpayer from certain foreign superannuation funds is set out in Subdivision 305-B of the ITAA 1997 and depends whether the taxpayer receives it within, or after, six months after their residency commences or foreign employment ends. Relevantly, in accordance with subsection 305-65(1) of the ITAA 1997, a superannuation lump sum received by person in consequence of the termination of their employment in a foreign country is not assessable and is not exempt income, that is, it is tax-free if : … b) it relates only to the period of that employment, holding of office, or engagement; and c) you were an Australian resident during the period of the employment, holding of office or engagement; and d) you receive the lump sum within 6 months after the termination; and … Based on the above, lump sum payment which the Taxpayer is expected to receive from the Fund in 20ZZ in consequence of the termination of their employment overseas, would not come under section 305-65 of the ITAA 1997 because: a) the payment would relate in part to a period of their overseas employment and in part to a period after they ceased that employment; b) the payment would be received more than six months after the termination; and c) the Commissioner does not have discretion to extend the date of receipt beyond six months after the termination. Therefore, lump sum payment the Taxpayer is expected to receive from the Fund in 20ZZ would be assessable income under section 305-70 of the ITAA 1997.