Private ruling: Taxation of death benefit paid to non-resident
Published: August 2011
Ruling period: Year ending 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Is any part of the superannuation lump sum death benefit payment made to you included as assessable income? Advice/Answers Yes.


Relevant legislative provisions: International Tax Agreements Act 1953 Schedule 1 | Income Tax Assessment Act 1936 Section 27AAB | Income Tax Assessment Act 1997 Subsection 6-5(3) | Income Tax Assessment Act 1997 Subsection 6-10(5) | Income Tax Assessment Act 1997 Subsection 995-1(1) | Income Tax Assessment Act 1997 Section 302-195 | Income Tax Assessment Act 1997 Section 302-200 | Income Tax Assessment Act 1997 Subsection 302-145(1) | Income Tax Assessment Act 1997 Subsection 302-145(2) | Income Tax Assessment Act 1997 Subsection 302-145(3) | Income Tax Regulations 1997 Regulation 302-200.01(2)

Reasons for decision: Detailed Reasoning - Summary of decision: A foreign resident is assessed on income derived from all sources in Australia The Double Tax Agreement (DTA) between Australia and overseas country does not contain an article that precludes Australia from taxing, taxed subject to Australia's taxation laws, lump sum payments from superannuation funds. The taxable component of a superannuation lump sum paid on the death of an individual to a non-dependant will be assessable income. For a non-dependant: A tax offset will ensure that the rate of tax payable on the taxed element of the taxable component of the superannuation death benefit will not exceed 15%. A tax offset will also apply to ensure that the rate of tax payable on the untaxed element of the taxable component of the superannuation death benefit will not exceed 30%. In this case, you may be entitled to a refund for some or all of the tax withheld. To make a claim you will need to complete and lodge a tax return for the relevant income year. Please see ' Guide to foreign income tax offset rules 2010-11 ' for further information. This can be accessed on our website at www.ato.gov.au by clicking Individuals > Find a form or publication > All publications > search and then entering 72923 in the Nat Number field. | Detailed Reasoning - Assessable Income: Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) states: If you are a foreign resident, your assessable income includes: (a) the ordinary income you derived directly or indirectly from all Australian sources during the income year; and (b) other ordinary income that a provision includes in your assessable income for the income year on some other basis other than having an Australian source. Subsection 6-10(5) of the ITAA 1997 states: If you are a foreign resident, your assessable income includes: (a) your statutory income from all Australian sources; and (b) other statutory income that a provision includes in your assessable income on some other basis than having an Australian source. This means that a foreign resident is assessed on income derived from all sources in Australia. Under the ITAA 1997, a foreign resident means a person who is not a resident of Australia for the purposes of Income Tax Assessment Act 1936 (ITAA 1936), that is, the person is a non-resident of Australia. In this case you have are considered to be a non-resident of Australia. | Detailed Reasoning - Double Taxation Agreements: The tax laws of different countries may mean that the income of an individual can be taxed in the country where that individual resides as well as the country in which the individual derived that income. To reduce this possibility, Australia has entered into a number of agreements with other countries to prevent this double taxation. These agreements are given legal force by the International Tax Agreements Act 1953 (the Agreements Act). Each agreement contains rules to establish which country has taxing rights over a particular type and source of income specified in the agreement. The Double Tax Agreement (DTA) between Australia and the overseas country is found in the Agreements Act. There is no article contained in the DTA that specifically refers to lump sum payments from superannuation funds. Consequently, as there is nothing contained in the DTA that precludes Australia from taxing lump sum payments from superannuation funds, then it may be taxed subject to Australia's taxation laws. Under subsection 302-145(1) of the ITAA 1997 the taxable component of a superannuation lump sum paid on the death of an individual to a non-dependant will be assessable income. For a non-dependant: · A tax offset will ensure that the rate of tax payable on the taxed element of the taxable component of the superannuation death benefit will not exceed 15% (subsection 302-145(2) of the ITAA 1997). · A tax offset will also apply to ensure that the rate of tax payable on the untaxed element of the taxable component of the superannuation death benefit will not exceed 30% (subsection 302-145(3)). In this case, you may be entitled to a refund for some or all of the tax withheld. To make a claim you will need to complete and lodge a tax return for the relevant income year. Please see ' Guide to foreign income tax offset rules 2010-11 ' for further information. This can be accessed on our website at www.ato.gov.au by clicking Individuals > Find a form or publication > All publications > search and then entering 72923 in the Nat Number field.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Relevant facts: The Deceased passed away in the 2008-09 income year. | You received a cheque for the Deceased's superannuation. | The total sum of the superannuation had tax withheld. | You are not a resident of Australia