Private ruling: Trust - foreign income
Date of advice: 29 October 2025
Published: 15 December 2025
Ruling period: Year ending 30 June 20XX.
Date scheme commenced: 1 July 20XX

Ruling: Q1: Does the Plan meet the definition of a foreign superannuation fund as per section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No. | Q2: Will you be assessed on withdrawals from the Plan under section 99B of the Income Tax Assessment Act 1936 (ITAA 1936)? | A2: Yes.

Relevant facts and circumstances: You are a dual citizen of Australia and Country X. You were born and lived in Country X before emigrating to Australia in 20XX. You have been a resident of Australia for taxation purposes since 20XX. You are X years of age and are retired. While living and working in Country X, you regularly deposited money into your Plan. Your funds are not locked within the Plan. You can withdraw these funds at any time. Any withdrawals in Country X will be subject to domestic withholding tax in Country X. You would like to transfer the funds in your Plan to Australia. You have provided us with a copy of the fund statement dated DD MM 20 XX. Assumptions For the purpose of this ruling, it is assumed you will transfer the funds from the Plan before 30 June 20XX.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 99B | Income Tax Assessment Act 1936 section 102AAM | Income Tax Assessment Act 1997 section 6-10 | Income Tax Assessment Act 1997 subsection 295-95(2) | Income Tax Assessment Act 1997 Subdivision 305-B | Income Tax Assessment Act 1997 section 305-70 | Income Tax Assessment Act 1997 Division 770 | Income Tax Assessment Act 1997 subsection 995-1(1) | Superannuation Industry (Supervision) Act 1993 subsection 10(1) | Superannuation Industry (Supervision) Act 1993 section 62

Reasons for decision: Summary: The Plan is a not considered a foreign superannuation fund as per subsection 995-1(1) ITAA 1997. | Detailed Reasoning - Lump sum payments received from certain foreign superannuation funds: Subdivision 305-B of the ITAA 1997 sets out the tax treatment of superannuation lump sum benefits paid from foreign superannuation funds and other foreign schemes for the payment of similar retirement or death benefits, as defined in section 305-55 of the ITAA 1997. Before determining whether an amount is assessable income under subdivision 305-B of the ITAA 1997, it is necessary to determine whether the payment is being made from a foreign superannuation fund. If the entity making the payment is not a foreign superannuation fund (or scheme for the payment of superannuation benefits), Subdivision 305-B will not apply to the payment. | Detailed Reasoning - Meaning of 'foreign superannuation fund': A 'foreign superannuation fund' is defined in subsection 995-1(1) of the ITAA 1997 as follows: (a) a superannuation fund is a foreign superannuation fund at a time if the fund is not an *Australian superannuation fund at that time; and (b) a superannuation fund is a foreign superannuation fund for an income year if the fund is not an Australian superannuation fund for the income year. Relevantly, subsection 295-95(2) of the ITAA 1997 defines 'Australian superannuation fund' as follows: A superannuation fund is an Australian superannuation fund at a time, and for the income year in which that time occurs, if: (a) the fund was established in Australia, or any asset of the fund is situated in Australia at that time; and (b) at that time, the central management and control of the fund is ordinarily in Australia; and (c) at that time either the fund had no member covered by subsection (3) (an active member) or at least 50% of: (i) the total *market value of the fund's assets attributable to *superannuation interests held by active members; or (ii) the sum of the amounts that would be payable to or in respect of active members if they voluntarily ceased to be members; (d) is attributable to superannuation interests held by active members who are Australian residents. A superannuation fund that is established outside of Australia and has its central management and control outside of Australia would qualify as a foreign superannuation fund. The fact that some of its members may be Australian residents would not necessarily alter this. | Detailed Reasoning - Meaning of 'superannuation fund': 'Superannuation fund' is defined in subsection 995-1(1) of the ITAA 1997 as having the meaning given by section 10 of the Superannuation Industry (Supervision) Act 1993 (SISA). Subsection 10(1) of the SISA states: superannuation fundmeans: (a) a fund that: (i) is an indefinitely continuing fund; and (ii) is a provident, benefit, superannuation or retirement fund; or (b) a public sector superannuation scheme. | Detailed Reasoning - Meaning of 'provident, benefit, superannuation or retirement fund': Whether the Plan is a foreign superannuation fund requires consideration of the meaning of the term 'provident, benefit, superannuation or retirement fund' in subsection 10(1) of the SISA. Each of these terms are not defined in the ITAA 1936, ITAA 1997, the SISA or elsewhere in the tax acts. Accordingly, those terms will derive their meaning from their ordinary meaning and the relevant case law. In the context of considering the term 'provident, benefit or superannuation fund established for the benefit of employees', in former subparagraph 23(j)(i) of the ITAA 1936, the Full Bench of the High Court in Mahony v Commissioner of Taxation (Cth) (1967) 41 ALJR 232; (1967) 14 ATD 519 ( Mahony ) considered that this phrase denoted 'a purpose narrower than the conferral of benefits in a completely general sense' and had to be characterised by 'some specific future purpose'. In the case of a provident fund, against 'contemplated contingencies; in the case of a superannuation fund 'on retirement, death or cessation of employment'; and, in the case of a benefit fund 'a benefit characterised by some specific future purpose' (e.g. a funeral fund). Furthermore, Justice Kitto's judgement in Mahony indicated that a fund does not satisfy any of the three provisions, that is, either a 'provident, benefit or superannuation fund', if there exist provisions for the payment of benefits 'for any other reason whatsoever'. A similar approach was also adopted by Taylor J and Windeyer JJ in Mahony who said: ...In other words, if they could, keeping within the terms of the trust, apply the fund or any portion thereof to purposes foreign to the true purposes of such a fund, then it would not be such a fund. Accordingly, the purpose of the fund must be solely consistent with it being a 'provident, benefit or superannuation fund. Similar observations have been made in a number of other authorities. In the context of what constitutes a 'superannuation fund' and a 'fund', Justice Windeyer in Scott v. Federal Commissioner of Taxation (No. 2) (1966) 10 AITR 290; (1966) 40 ALJR 265; (1966) 14 ATD 333emphasised the 'sole purpose' requirement, stating: ...I have come to the conclusion that there is no essential single attribute of a superannuation fund established for the benefit of employees except that it must be a fund bona fide devoted as its sole purpose to providing for employees who are participants money benefits (or benefits having a monetary value) upon their reaching a prescribed age. In this connexion "fund", I take it, ordinarily means money (or investments) set aside and invested, the surplus income therefrom being capitalised. I do not put this forward as a definition, but rather as a general description. More recently, in considering the term 'provident, benefit, superannuation or retirement fund' as it now appears in the definition of 'superannuation fund' in subsection 10(1) of the SISA, Senior Member FD O'Loughlin in Baker v. FC of T [2015] AATA 469 (Baker) stated at [16]: Accordingly, a trust arrangement that is not a provident fund, benefit fund or retirement fund, that allows for payment of superannuation styled benefits and other benefits not permitted by the Supervision Act will not be a superannuation fund. Whilst the Senior Member in Baker made reference to 'benefits not permitted by the Supervision Act' in the context of considering whether a particular fund which was not a 'provident, benefit or retirement fund' was a 'superannuation fund', it is noted that section 62 of the SISA largely replicates the relevant case law and requires the fund be 'maintained solely' for one or more of the 'core purposes' of providing benefits to a member when the events occur: on or after retirement from gainful employment; attaining a prescribed age; or on the member's death (this may require the benefits being passed on to a member's dependants or legal representative). Whether a fund has been established for the requisite purpose required, is determined by considering the terms of the trust deed. This is an objective determination, and it is not determined by the subjective intentions of the parties. Whether a particular arrangement constitutes a superannuation fund is dependent upon the facts and circumstances of the case. Regard is had to the terms of the constituent arrangements and what the relevant trustee can and cannot do, and is and is not obliged to do, with the trust assets and property. As Taylor and Windeyer JJ observed in Mahony : It thus becomes necessary to look carefully and critically at the terms of the trust deed, at what is required and what is permitted - that is to say in what ways the trustees might, without any breach of the trusts it imposes, apply the trust property. Under the locked-in Plan, a member cannot receive the transferred funds. It either has to stay in the Plan or be transferred to another locked-in Plan to provide a member with a retirement income. A member cannot withdraw funds from a locked-in Plan as the monies will be used to buy a life annuity at retirement age. | Detailed Reasoning - Application to your circumstances: In your case, the Plan allows you to withdraw benefits at any time as the Plan is not a locked-in Plan. The Plan satisfies some of the requirements of a foreign superannuation fund, however in general the Plan is not exclusively a provident, benefit or superannuation fund because it does not provide benefits for the specific future purposes of the individual's retirement. Members can withdraw benefits at any time for any reason and the withdrawal is treated as income. In other words, the Plan provides for the payment of benefits for reasons other than retirement and not solely (that is, exclusively) for retirement purposes. Accordingly, the lump sum benefit you will receive from the Plan will not be a payment from a foreign superannuation fund and section 305-70 of the ITAA 1997 will not have any application. The payment will instead be assessable to you under section 99B of the ITAA 1936. | Summary: Subsection 99B(1) of the ITAA 1936 applies to capture the entire amount as assessable income. The whole amount of the earnings is assessable in Australia, not just the earnings that accrued from when you became a resident of Australia for taxation purposes. Where the lump sum withdrawal amount is taxed in Country X, you may be eligible for a foreign income tax offset in Australia. | Detailed Reasoning - Foreign trust income: A distribution from the Plan may be assessable income under section 99B of the ITAA 1936. Broadly, 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. Subsection 99B(1) of the ITAA 1936 provides that where a beneficiary who was an Australian resident at any time during an income year is paid an amount from a trust or has an amount of trust property applied for their benefit, that amount is to be included in the assessable income of the beneficiary in the income year it is paid. However, subsection 99B(2) of the ITAA 1936 reduces the amount to be included in assessable income under subsection 99B(1) by so much of that amount, relevantly for present purposes, as represents the corpus of the trust, but not to the extent that it is attributable to income derived by the trust which would have been subject to tax had it been derived by a resident taxpayer. The term 'corpus' is not defined in the legislation; therefore, it takes the ordinary meaning of the term. The Macquarie Dictionary (Online edition 2019) defines 'corpus' to mean a 'principal or capital sum, as opposed to interest or income'. If section 99B of the ITAA 1936 includes a distribution of accumulated income from a non-resident trust estate in your assessable income, you may be liable to pay additional tax in the nature of an interest charge on the distribution, under section 102AAM of the ITAA 1936. Accordingly, the whole amount of the earnings is assessable in Australia, not just the earnings that accrued from when a member of the fund became a resident of Australia for taxation purposes. The amount that represents the corpus of the Plan includes any amounts previously deposited into the Plan by you and your employer(s). The lump sum may also include amounts that represent earnings of the Plan. The Plan earnings 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. ATO Interpretation Decision ATO ID 2011/93 Income Tax: Application of section 99B of the Income Tax Assessment Act 1936 when accumulated foreign source income is paid to an Australian resident beneficiary who was a non-resident when the trustee derived the income provides the Commissioner's view of the operation of section 99B of the ITAA 1936 in respect of the receipt of an amount that comprised solely of foreign interest income. Paragraph 99B(2)(a) of the ITAA 1936 applies so that: (a) the proportion of any lump sum that represents amounts previously deposited to the fund by a taxpayer and their employer (the corpus of the fund) is excluded from that taxpayer's assessable income, and (b) the proportion of any lump sum that represents earnings of the fund from the commencement date of the fund is included in that taxpayer's assessable income. | Detailed Reasoning - Foreign income tax offset (FITO): Where the lump sum withdrawal amount is taxed in Country X you may be eligible for a FITO in Australia, but only if certain conditions are met. FITO provisions are contained in Division 770 of the ITAA 1997. A resident of a foreign country does not receive the offset for some foreign income taxes. The offset is for the income year in which your assessable income included an amount in respect of which you paid foreign income tax - even if you paid the foreign income tax in another income year. If the foreign income tax has been paid on an amount that is only partly assessable income in Australia, only a proportionate share of the foreign income tax (the share that corresponds to the part that is assessable income) will count towards the tax offset. | Detailed Reasoning - Section 102AAM: Section 102AAM of the ITAA 1936 imposes an additional interest charge on certain distributions from non-resident trusts, including distributions taxed under subsection 99B(1) of the ITAA 1936. This is a compensatory charge for the tax deferred while profits were accumulated offshore in the trust. The Commissioner has no discretion to remit or reduce the additional charge imposed by section 102AAM. The interest charge is calculated under subsection 102AAM(5) of the ITAA 1936. The amount interest is charged on is determined in accordance with the formula in subsection 102AAM(2): {Distributed amount × applicable rate of tax} − Foreign income tax offset. The withdrawal which will result in an amount included in your assessable income under subsection 99B(1) is from a foreign resident trust. Country X is a listed country under regulation 19 of the Income Tax Assessment (1936) Act Regulations 2015 . On that basis, paragraph 102AAM(1)(a) provides that the 'distributed amount' will be the section 99B amount where the distribution relates to a listed country trust estate and all or part of the amount is attributable to income or profits of the trust in the form of eligible designated concession income. Subsection 102AAM(1A) further provides that the 'distributed amount' is taken to be wholly attributable to eligible designated concession income unless the contrary is established. The amount interest will be charged on therefore equals the amount of the distribution that is included in the beneficiary's assessable income under subsection 99B(1) grossed up for any foreign tax claimed on that share. The applicable rate of tax is the maximum marginal rate that applies for the income year of the taxpayer in which the trust distribution is received. Interest is charged at the base rate and assuming the trust received the reinvested income post 1 July 19xx, interest will be calculated and imposed from the income year in which the reinvested income was earned. | Detailed Reasoning - Application to your circumstances: As discussed above, and consistent with the Commissioner's view in ATO ID 2011/93, the earnings, or income, must be included in your tax return in the year you withdraw the lump sum amount from the Plan. You may need to provide relevant documentation to support any claims, including that the corpus amounts were contributions by yourself or a third party should we undertake a review of your tax affairs. Where the lump sum withdrawal amount is taxed in Country X, you may be eligible for a FITO in Australia, but only if certain conditions are met.