The ruling dealt with an individual who became a resident of Australia and who held benefits in Country A pension schemes Fund A and Fund B at their residency date.

Contributions were made into Country A Fund C after the residency date. Additionally, benefits in Fund A were transferred to Fund D, a Country A pension scheme.

After the residency date, Funds B, C and D were transferred to Fund E, a Country A pension scheme and benefits in Fund E were transferred to Fund F, a Country A pension scheme. The total benefits in Fund F were transferred to an Australian superannuation fund at a designated exchange rate.

The tribunal heard that the individual made a valid choice using a form to have their Australian super fund pay tax on a foreign super transfer to include the applicable fund earnings in the Australian fund's assessable income in relation to a lump sum paid to it.

The individual also received a pension commencement lump sum from Fund E, and a lump sum payment from Fund E. They stated to the tribunal that all their Country A superannuation funds are foreign superannuation funds as defined in the ITAA 1997 and Superannuation Industry (Supervision) Act 1993 (SISA), and they may transfer the remaining benefits in Fund E to Australia as a lump sum, either to themselves or paid into a complying superannuation fund.

The PBR stated that when a person receives a lump sum from a foreign superannuation fund more than six months after they became an Australian resident, 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.

This 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.

It continued that 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.

“Any part of the lump sum paid by a foreign superannuation fund, including any amount of applicable fund earnings, that is paid into another foreign superannuation fund is not assessable income and is not exempt income under subsection 305-70(4) of the ITAA 1997 in the income year in which the transfer occurs,” the ruling stated.

“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.”

In regard to the first transfer from Fund A to Fund D, the ruling stated that as the individual became a member of Fund A before becoming an Australian resident, the applicable fund earnings on this lump sum will be worked out in accordance with subsection 305-75(3) of the ITAA 1997.

For transfer two from Fund D to Fund E, it stated as the individual became a member of Fund D after becoming a resident of Australia, the applicable fund earnings on this lump sum will be worked out in accordance with subsection 305-75(2) of the ITAA 1997.

“On the basis that Fund E is a foreign superannuation fund, any part of the lump sum paid by Fund D to Fund E is not assessable income and is not exempt income under subsection 305-70(4) of the ITAA 1997,” it continued.

For transfer three of Fund B to Fund E, the tribunal stated it was a similar situation to transfer one, while the remaining transfers were ruled to be under the same ITAA subsection as transfer two.