1 Is any part of the amount withdrawn from your foreign inherited retirement savings plan account subject to tax in Australia under section 99B of the Income Tax Assessment Act 1936 (ITAA 1936)?
Yes. Question 2 Does the amount paid into your foreign inherited retirement savings plan account as a beneficiary of your relative's foreign retirement savings plan represent the corpus of a trust so that on withdrawal of the funds from the account it is excluded from your assessable income in accordance with paragraph 99B(2)(a) of the ITAA 1936? Answer Yes. Question 3 Is any earnings growth that accrued in the foreign inherited retirement savings plan account from the time you became its owner included in your assessable income on withdrawal of the funds from the account in accordance with subsection 99B(1) and paragraph 99B(2)(a) of the ITAA 1936? Answer Yes. This ruling applies for the following period: Year ended 30 June 20XX The scheme commences on: 1 July 20XX
You are an Australian resident for tax purposes. You had a relative who lived in Country X. Your relative held a retirement savings plan offered by their employer in Country X. Your relative named you as a beneficiary of the plan. The plan rules state that there are various conditions under which funds held in the plan may be withdrawn which include separation from service regardless of age, attainment of age X even if still employed, unforeseeable emergency, death and loans. Your relative died and in accordance with the plan rules, a beneficiary account was established for you as a beneficiary of a deceased plan participant. The funds in your deceased relatives' account were rolled over into your beneficiary account. Generally, a beneficiary may elect to receive payment of the plan benefit from their beneficiary account as a lump sum or in annual, monthly or quarterly instalment payments. You withdrew all the funds from your beneficiary account which were paid into a bank account you held in Country X. Country X tax was withheld from the amount paid to you.
Income Tax Assessment Act 1936 section 99B Income Tax Assessment Act 1936 subsection 99B(1) Income Tax Assessment Act 1936 subsection 99B(2) Income Tax Assessment Act 1936 paragraph 99B(2)(a) Income Tax Assessment Act 1997 section 10-5
The assessable income of a resident taxpayer includes income according to ordinary concepts (ordinary income) and statutory income derived from all sources, whether in or out of Australia, during the income year. Section 10-5 of the Income Tax Assessment Act 1997 (ITAA 1997) lists certain statutory amounts that form part of assessable income. Included in this list is section 99B of the ITAA 1936 which deals with trust income not previously subject to tax in Australia. Subsection 99B(1) of the ITAA 1936 provides that where, during a year of income, a beneficiary who was a resident at any time during the year is paid a distribution from a trust, or has an amount of trust property applied for their benefit, the amount is to be included in the assessable income of the beneficiary. Relevantly to your situation, subsection 99B(2) of the ITAA 1936 modifies the rule in subsection 99B(1) and has the effect that the amount to be included in assessable income under subsection 99B(1) is not to include any amount that represents either: • Corpus of the trust estate ( except
to the extent it is attributable to mounts derived by the trust estate that, if they had been derived by a taxpayer being a resident, would have been included in the assessable income of that taxpayer of a year of income (paragraph 99B(2)(a) of the ITAA 1936) • amounts that would not have been included in the assessable income of a resident taxpayer (paragraph 99B(2)(b) of the ITAA 1936), and • amounts previously included in the beneficiary's income under section 97 of the ITAA 1936 (paragraph 99B(2)(c) of the ITAA1936). The Macquarie Dictionary (Online edition 2022) defines 'corpus' to mean a 'principal or capital sum as opposed to interest or income'. In your case, to the extent that the amount withdrawn from the foreign inherited retirement savings plan account represents an amount rolled-over from another plan, the amount represents corpus of a trust estate and is an amount to which paragraph 99B(2)(a) of the ITAA 1936 applies. Further, the amount is not attributable to an amount or amounts derived by the trust estate that, if they had been derived by an Australian resident taxpayer, would have been included in the assessable income of that taxpayer.
Therefore, the amount rolled over into your inherited retirement savings plan account as a beneficiary of your relative's retirement savings plan and subsequently withdrawn by you is not subject to tax under subsection 99B(1) of the ITAA 1936. However, to the extent that the amount withdrawn from the inherited retirement savings plan account represented earnings on the corpus of the fund from when you became its owner, the amount would represent an amount that, if derived by a taxpayer being a resident, would have been included in the assessable income of that taxpayer. This is because earnings by way of interest or capital gains is normally assessable income in the hands of an Australian resident taxpayer. Therefore, the amount withdrawn from the plan account that represented earnings on the corpus of the fund from when you became its owner is not excluded from assessable income by paragraph 99B(2)(a) of the ITAA 1936 and is included in your assessable income under subsection 99B(1) of the ITAA 1936.