Private ruling: Applicable fund earnings - multiple transfers
Date of advice: 13 October 2025
Published: 1 December 2025
Ruling period: Period ended 30 June 20XX
Date scheme commenced: XXXX

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: The applicable fund earnings $XXX needs to be included as an assessable income for the 20XX income year.


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 Other relevant documents | 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 Interpretative Decision ATO ID 2012/49 Superannuation lump sum paid from a foreign superannuation fund to an Australian resident at the same time as an annuity commenced: applying 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 earnings is 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 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). An amount of applicable fund earnings may also include amounts of previously exempt fund earnings which occur where an amount in a foreign super fund is transferred to another foreign super fund before being received in Australia. These earnings would not otherwise be included and are set aside until the lump sum is transferred to you, or your complying Australian super fund. | Detailed Reasoning - Multiple lump sum payments: Where multiple lump sums have been paid to you from the same foreign superannuation fund, then subsection 305-75(4) of the ITAA 1997 provides a modification to 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 start day 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. Similarly, 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 modified to the day after you received the most recent lump sum. | Detailed Reasoning - Foreign currency conversion: The foreign currency translation rules for lump sums paid by foreign superannuation funds are explained in 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 11 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. 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 foreign currency are translated into Australian dollars using the exchange rate applicable on the dates of receipt. However, subsection 305-70(2) of the ITAA 1997 states that only so much of the lump sum as equals the applicable fund earnings is included in assessable income. Therefore, the assessable income will be limited to the amount of the lump sum in any case where the lump sum is less than the applicable fund earnings. We worked out 5 applicable fund earnings for each transfer, using the formula under subsection 305-73 of the ITAA 1997. The taxpayer is required to include the total applicable fund earnings as assessable income in their 20XX-XX income tax return.

The taxpayer received a foreign fund from country A. | The taxpayer became an Australian resident for tax purposes on XXXX. | There were no post-residency contributions to the taxpayer's foreign pension funds. | There was no foreign fund transferred from another foreign fund to the taxpayer's foreign pension funds since the taxpayer became an Australian resident for tax purposes. | The taxpayer made several withdrawals from their foreign fund in the income year XXXX.