Private ruling: Applicable fund earnings
Date of advice: 1 June 2026
Published: 17 August 2026
Ruling period: Year ended 30 June 20YY

Ruling: Q1: Is any part of the lump sum payment received by you from the Fund assessable as applicable fund earnings under section 305-70 of the ITAA 1997? | A1: No.

Relevant facts and circumstances: You became an Australian resident. At that time, you held an interest in a country Z retirement annuity (the Fund). You previously received a lump sum payment and commenced an annuity income stream from another product within the Fund. You declared applicable fund earnings in your income tax return, for the relevant year, in relation to the lump sum payment received. During the 20YY income year you fully commuted the annuity and received a lump sum payment. There have been no contributions, or transfers from other foreign funds, 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 We followed these ATO view documents | ATO Interpretative Decision 2015/7: Foreign currency translation rules in working out 'applicable fund earnings' under section 305-75 of the ITAA 1997

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. In this case, your interest in the Fund to which the lump sum relates, was established before you became an Australian resident. As you were not an Australian resident at all times during the period, subsection 305-75(3) of the ITAA 1997 will apply. 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 . 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 - Multiple lump sum payments: Where multiple lump sums have been paid to you from the same foreign superannuation fund, subsection 305-75(4) of the ITAA 1997 modifies the calculation of applicable fund earnings. The subsection provides: If the lump sum is not the first lump sum from the fund you have received to which this section applies, for subsections (2) and (3) the startday is the day after you received the most recent such lump sum. Accordingly, where you are not an Australian resident at all times during the period to which a lump sum relates, and the lump sum is not the first lump sum paid from the fund then subsection 305-75(4) of the ITAA 1997 modifies the applicable fund earnings calculation under subsection 305-75(3) of the ITAA 1997. In particular, the 'start date' in paragraph 305-75(3)(a)(i) of the ITAA 1997 for the purpose of calculating the amount vested in you just before you first became an Australian resident during the period, is taken to be the day after you received the most recent lump sum. In this case a previous lump sum payment was made from the Fund, therefore, the start day for the calculation is XXX. | Detailed Reasoning - Calculation of your applicable fund earnings:: As you became a member of the Fund before you became a resident of Australia, the 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 X currency are translated into Australian dollars using the exchange rate applicable on the date of receipt. In this case, the relevant exchange rate was AUD $xxxx. Table 1 : applicable fund earnings Item Description Amount in ZAR Amount in AUD ($) A Value of the taxpayer's interest in the Fund on the start day . The day after you received the most recent such lump sum. XXX XXX B Part of the lump sum from contributions into the 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(2)(a) of the ITAA 1997) XXX XXX E Amount in the Fund vested in the taxpayer when the lump sum was paid XXX XXX F E - D (Calculated as per the step outlined in paragraph 305-75(3)(b) of the ITAA 1997) XXX XXX G The proportion of the total days during the period from the residency date to the date of receipt, of which the taxpayer was an Australian resident 100% 100% H Previously exempt fund earnings (if any) XXX XXX 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) XXX XXX The applicable fund earnings in respect of the lump sum payment you received in the 20YY income year are nil.