Private ruling: Applicable fund earnings - multiple lump sum payments
Date of advice: 15 April 2026
Published: 29 June 2026

Ruling: Q1: Is any part of the lump sum payments received by you from the Fund assessable as applicable fund earnings under section 305-70 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. | Q2: For subsequent lump sum payments, does the calculation period for applicable fund earnings commence on the day after the previous payment, in accordance with subparagraph 305-75(3)(a)(i) and subsection 305-75(4) of the ITAA 1997? | A2: Yes. This private ruling applies for the following period: Period ended 30 June 20YY Period ended 30 June 20YY

Relevant facts and circumstances: You became an Australian resident for tax purposes. At residency date, you held an interest in the XX pension scheme (the Fund): You have received multiple lump sum payments from the Fund There have been no contributions, or transfers from other foreign funds, into the XX 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 | Income Tax Assessment Act 1997 section 960-50 Other relevant documents | ATO ID 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. 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). 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. | 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). Specifically, the 'start date' in paragraph 305-75(3)(a)(i) used to determine 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 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 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. | Detailed Reasoning - Applicable fund earnings calculation: As you became a member of the Fund prior to becoming a resident of Australia, the applicable fund earnings for the lump sum payments have been calculated in accordance with subsection 305-75(3) of the ITAA 1997. Any amounts in xx are translated into Australian dollars using the exchange rate applicable on the respective dates of receipt. 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. The applicable fund earnings for each lump sum payment were calculated using the formula set out in subsection 305-75(3) of the ITAA 1997. You are required to include the applicable fund earnings in your assessable income for the 20YY-YY and 20YY-2YY income years.