Private ruling: Lump sum payment
Date of advice: 22 September 2025
Published: 10 November 2025
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: XX XX 20XX

Ruling: Q1: Will Article 18(2) of the Convention between Australia and New Zealand for the Avoidance of Double Taxation with respect to Taxes on Income and Fringe Benefits and the Prevention of Fiscal Evasion (the Convention) apply to treat the lump sum payment by the Trustee of the Fund to Person A as non-taxable in Australia? | A1: Yes

Relevant facts and circumstances: 1. A Company is incorporated in New Zealand. The Company is the Trustee of the Fund. The directors of the Company are New Zealand tax residents. 2. The Trustee administers a retirement savings fund (the Fund), to provide individual personal benefits, pensions or retiring allowances for employees of employers and other persons who are eligible to join the Fund. 3. When the Trustee was incorporated, and the Fund was established, there were no Australian assets, and since its establishment, central management and control has been outside Australia. 4. The Fund is governed by the Deed, originally executed on XX XX XXXX, amended and consolidated on XX XX XXXX. 5. The Fund creates separate investment portfolios for each member, with each member's portfolio managed under a separate trust for that member. 6. The Fund shall not allow members to participate as beneficiaries in income or gains arising from the Fund, and investments made on behalf of one beneficiary shall not be pooled with investments made on behalf of any other beneficiary. 7. A member is defined under the Deed as a person who has been admitted to membership of the Fund and has not ceased to be a member. New Zealand residents are prohibited from becoming a member of the Fund, and an existing member does not continue to be a member should they subsequently become a New Zealand resident. 8. Under Clause XX of the Deed, a member may receive a benefit from the Fund in accordance with the rules contained in Schedule 1 of the Deed. 9. Schedule 1 of the Deed sets out circumstances which entitle members to a benefit payment. Specifically, Schedule 1 entitles a member who has reached the 'normal retirement age', and if employed, has left service, to a benefit equal to the 'accumulated credit'. 10. Accumulated credit is defined under Clause XX of the Deed as the total balances of the employee accounts of a member. 11. An employee account is defined under Clause XX of the Deed as an account required to be kept in respect of a member. 12. 'Normal retirement age' of a member is defined under Clause XX of the Deed as the normal age of retirement as determined by the Trustee from time to time. 13. Person A became a member of the Fund on XX XX 20XX. 14. A separate sub fund was established to hold your entitlement entitlements called The Person A Sub Fund. 15. At the time Person A became a member of the Fund, Person A was not a resident of Australia or New Zealand for tax purposes. At the time, Person A was a resident of Country X for tax purposes. 16. Prior to becoming a resident of Australia for tax purposes on XX XX 20XX, Person A resided in Country X for approximately X years. Person A is currently an Australian resident for tax purposes and has been since XX XX 20XX. 17. Person A was born on XX XX 19XX and retired from full-time employment on XX XX 20XX, aged XX. 18. Person A requested a payment from the Fund in XX 20XX. Pursuant to the Deed the trustees determined that the 'normal retirement age' for Person A would be XX years of age. 19. According to Clause XX of the Deed, benefit payment requests must be made in writing to the Trustee, and the Trustee shall determine whether the benefit shall be paid wholly or in part as a lump sum payment, and Trustee shall also have the power to determine the source of such payment. 20. Person A is proposing to request benefit payments totalling $XXX from the Fund. The Trustee indicate that the benefit payments may be paid as a number of lump sums. One payment in the first financial year and other payments in the following financial year. 21. At the time of the proposed withdrawals, Person A will be a resident of Australia for tax purposes.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 305 The Convention between Australia and New Zealand for the Avoidance of Double Taxation with respect to Taxes on Income and Fringe Benefits and the Prevention of Fiscal Evasion (the Convention) , Article 18(2)

Reasons for decision: Summary: 22. Division 305 of the Income Tax Assessment Act 1997 sets out the tax treatment of superannuation benefits received by taxpayers from non-complying superannuation plans, including lump sum payments from foreign superannuation funds. The assessment of such lump sums is subject to the operation of Australia's international tax treaties. 23. Article 18(2) of the Convention provides that: Lump sums arising in a Contracting State and paid to a resident of the other Contracting State under a retirement benefit scheme, or in consequence of retirement, invalidity, disability or death, or by way of compensation for injuries, shall be taxable only in the first-mentioned State. 24. Paragraph 2.292 of the Explanatory Memorandum to the International Tax Agreements Amendment Bill (No. 1) 2010 sets out the delegations' consideration of the phrase 'retirement benefits scheme' in the course of negotiating the Convention: It is understood that the term 'retirement benefit scheme' means an arrangement in which the individual participates in order to secure retirement benefits. In the case of payments arising in Australia a retirement benefit scheme includes a superannuation fund and a retirement savings account and in the case of New Zealand includes any superannuation scheme ... 25. The term 'superannuation scheme' is defined in the Income Tax Act 2007 (New Zealand ) as meaning, amongst other things: i. a trust or unit trust established by its trust deed mainly for the purpose of providing retirement benefits to beneficiaries who are natural persons or paying benefits to superannuation funds ... 26. Paragraph 2.294 of the Explanatory Memorandum to the International Tax Agreements Amendment Bill (No. 1) 2010 notes the delegations' understanding of where lump sums arise: It is understood that pensions, other similar periodic remuneration and lump sums referred to in Article 18 will arise where the fund is established or, in the case of such income paid by the Government of a Contracting State, in that State. Application to your circumstances 27. The Fund falls within scope of what is a 'retirement benefit scheme' in Article 18(2) of the Convention. The payment of $XXX by the Trustee of the Fund to Person A is a lump sum that arises in New Zealand. That lump sum will be paid under a retirement benefit scheme. Consequently, the lump sum will not form part of Person A assessable income in accordance with Article 18(2) of the Convention.