Private ruling: Assessable income
Date of advice: 4 July 2025
Published: 1 September 2025
Ruling period: Income year 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will an interest charge under section 102AAM of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the taxable component of Person A's (the "Taxpayer's") withdrawal? | A1: Yes. | Q2: Will an interest charge under section 102AAM of the ITAA 1936 apply to the amount wholly reduced under section 99B(2)(a) of the ITAA 1936 being the corpus component of the Taxpayer's withdrawal? | A2: No.

Relevant facts and circumstances: The Taxpayer arrived in Australia in late January 19XX under a temporary work visa. They became a permanent Australian citizen approximately two years later in the year 20XX. They have a traditional retirement account plan (Fund A) with Company A which was established in 19XX, and which is administered in Country A. In 19XX through their then employer, the Taxpayer set up another plan in a xxxx fund (Fund B). In January 20YY, they rolled the entire Fund A balance into a capital appreciation fund (Fund C) but kept Fund B separate. No additional funds were added to Fund A or Fund B. The Taxpayer withdrew $XXXXX from Fund A on XX XXX 202X for the period X XX 202X to Y YY 202X.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 99B | Income Tax Assessment Act 1936 section 102AAM | Income Tax Assessment (1936) Act Regulations 2015 regulation 19

Reasons for decision: Detailed Reasoning - Question 1: Section 102AAM is located in Division 6AAA of the ITAA 1936. If section 99B of ITAA 1936 includes an amount in assessable income, section 102AAM will also apply to impose an additional interest charge on the Taxpayer. The interest charge imposed by section 102AAM is intended to compensate for the deferral of Australian tax that occurred as a result of accumulating the income or profits in the trust. The Commissioner has no discretion to remit or reduce the additional tax imposed by section 102AAM. The section 102AAM interest charge may apply to a distribution of profits from a non-resident trust estate to the extent the distribution was made from profits that: • are referrable to eligible designated concession income derived in an income year when the trust was a resident of a listed country, or • were not subject to tax in a listed country and were derived in an income year when the trust was a resident of an unlisted country. Country A is a listed country under regulation 19 of the Income Tax Assessment (1936) Act Regulations 2015 . | Detailed Reasoning - In the Taxpayer's case:: The proposed future withdrawal from Fund A on the accumulated earnings since the inception of the fund will be subject to an interest charge under section 102AAM. | Detailed Reasoning - Question 2: Will an interest charge under section 102AAM of the ITAA 1936 apply to the amount wholly reduced under section 99B(2)(a) of the ITAA 1936 being the corpus component of the Taxpayer's withdrawal? | Detailed Reasoning - Answer: No. | Detailed Reasoning - Detailed reasoning: The proposed future withdrawal from Plan A on the corpus since the inception of the fund will not be subject to an interest charge under section 102AAM. Section 99B requires an Australian tax resident beneficiary to include in their assessable income an amount representing trust property that is paid to, or applied for their benefit (for example, a distribution of income or capital) subject to certain legislated exceptions. | Detailed Reasoning - In the Taxpayer's case:: The corpus exemption applies to amounts that represent the corpus of the trust. However, it excludes amounts that, if derived by an Australian resident taxpayer, would have been included in the taxpayer's assessable income for any income year. | Detailed Reasoning - Calculation of the interest charge: The interest charge will cease to accrue on the last day of the income year in which the distributed amount is included in the assessable income of the beneficiary, in this case the taxpayer. The amount on which interest is payable is worked out using the following formula: Distributed amount ×applicable rate of tax - FITO The distributed amount is the amount of the distribution that is included in your assessable income under section 99B of the ITAA 1936. This amount is grossed up for any foreign tax you can claim 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. For amounts paid out of income or profits accumulated earlier than the 1990-91 income year, the interest period begins at the start of the 1990-91 income year. For later income years it begins from the start of the income year following the income year it was accumulated. The interest varies depending on the period but from 14 September 2006 it is the base interest rate. You are required to complete the section 102AAM calculation and include the amount on an additional information schedule when lodging the relevant income tax return.

Will an interest charge under section 102AAM of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the taxable component of the Taxpayer's withdrawal?