Private ruling: Applicable fund earnings
Date of advice: 11 February 2026
Published: 30 March 2026
Ruling period: 30 June 20XX

Ruling: Q1: Is any part of the lump sum payment you received 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. While living in Country B, you became a member of Country B pension scheme. During the 20XX income year you received a lump sum payment from the Foreign Fund. Tax was withheld. The benefit was deposited to your country B bank account. The RBA exchange rate was applied on this date. No contributions were made to the foreign fund since you became an Australian resident for tax purposes. No amounts were transferred from any other foreign fund into the fund since you became an Australian resident.

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 960-50 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, amounts representing earnings accrued during periods of non-residency, as well as amounts arising from transfers into the paying fund, do not form part of the taxable amount when the lump sum is paid. | 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. | 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 A$1 = £pound;0.XXXX on DD MM YYYY. | You should include your applicable fund earnings of $XXX (calculated as shown in the table below) in your assessable income for the 20XX-XX income year. | Table 1: Assessable income | Item | Description | Amount in GBP ( £pound;) | Amount in AUD ($) | A | Value of the Taxpayer's interest in the Foreign Fund on the day before the Taxpayer became an Australian resident (the residency date or start day) | £pound;XXX | $XXX | B | Part of the lump sum from contributions into the Foreign Fund | 0 | $0 | C | Part of the lump sum from amounts transferred from other foreign funds | 0 | $0 | D | A + B + C | (Calculated as per the step outlined in paragraph 305-75(3)(a) of the ITAA 1997) | £pound;XXX | $XXX | E | Amount in the Foreign Fund vested in the Taxpayer when the lump sum was paid (date of receipt) | £pound;XXX | $XXX | F | E - D | (Calculated as per the step outlined in paragraph 305-75(3)(b) of the ITAA 1997) | £pound;XXX | $XXX | G | The proportion of the total days during the period from the residency date (start day) to the date of receipt, of which the Taxpayer was an Australian resident | 1 | 1 | H | Previously exempt fund earnings (if any) | £pound;X | $X | 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) | £pound;XXX | $XXX