Private ruling: Applicable Fund Earnings
Date of advice: 8 December 2025
Published: 2 February 2026
Ruling period: DD June 20XX
Date scheme commenced: DD July 20XX

Ruling: Q1: Is any part of the lump sum payment received by you from the foreign 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: You became a resident of Australia for taxation purposes. Prior to becoming an Australian resident, you became a member of the foreign fund. You received a lump sum payment from the foreign fund into your Australian bank account during the 20XX income year. The exchange rate was A$X = GBP £pound;X.xxxx. The foreign fund provided the value of the lump sum amount at residency date. There have been no contributions into the fund since you became an Australian resident for tax purposes. You stated there have been no transfers into the fund since you became an Australian resident for tax purposes.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 305-70 | Income Tax Assessment Act 1997 section 305-75 | Income Tax Assessment Act 1997 section 305-80 | Income Tax Assessment Act 1997 section 960-50 | Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision: Detailed Reasoning - Applicable Fund Earnings: When a person receives a lump sum from a foreign superannuation fund more than six months after they became an Australian resident, then broadly, the earnings 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. 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). The effect of section 305-75 of the ITAA 1997 is that only the income earned in respect of the foreign superannuation fund since Australian residency, less any contributions made in that period, is assessed. Further, any amounts representative of earnings during periods of non-residency, and transfers into the paying fund do not form part of the taxable amount when the lump sum is paid. | 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 foreign 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 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 $X = £pound;X.xxxx. You should include your applicable fund earnings of $xxxx (calculated as shown in the table below) in your assessable income for the 20XX income year. Table 1: Applicable fund earnings calculation | Detailed Reasoning - A: Amount of lump sum, as a proportion of total interest in the UK Fund, vested in the taxpayer on the day just before the Residency Date. xxxx xxxx | Detailed Reasoning - B: Part of the payment attributable to contributions to UK Fund during the remainder of the period £pound;0.00 $0 | Detailed Reasoning - C: Part of the payment attributable to amounts transferred into UK Fund from any other foreign superannuation funds during the remainder of the period £pound;0.00 $0 | Detailed Reasoning - D: A + B + C (Calculated as per the step outlined in paragraph 305-75(3)(a) of the ITAA 1997) xxxx xxxx | Detailed Reasoning - E: Amount of lump sum in the UK Fund vested in the Taxpayer when transferred to Australia - as a proportion of total interest xxxx xxxx | Detailed Reasoning - F: E - D (Calculated as per the step outlined in paragraph 305-75(3)(b) of the ITAA 1997) xxxx xxxx | Detailed Reasoning - G: The proportion of the total days during the period from the residency date (start day) to the date of receipt, of which you were an Australian resident 1 1 | Detailed Reasoning - H: Previously exempt fund earnings (if any) £pound;0.00 $0 | Detailed Reasoning - I: Applicable fund earnings = (F x G) + H (Calculated as per the steps outlined in paragraphs 305-75(3)(c) and 305-75(3)(d) of the ITAA 1997) xxxx xxxx