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Lump sums from a foreign super fund

If you received a lump sum payment from a foreign super fund, you may need to pay tax on it. This depends on a number of factors, including how soon after receiving it you became an Australian resident or you stopped working.

Your lump sum may be tax-free if you receive it within six months of becoming a resident or within six months after ceasing foreign employment. Read on to see if you meet all of the criteria.

Within six months of becoming a resident

Your lump sum payment from a foreign super fund is tax-free if all of the following apply:

  • You receive the lump sum within six months of becoming an Australian resident.
  • The lump sum relates only to a period
    • when you were not an Australian resident, or
    • that started after you became an Australian resident and ended before you received the payment.
  • The lump sum amount does not exceed the amount in the fund that was vested in you when you received the payment.

Within six months of ceasing foreign employment

Your lump sum payment from a foreign super fund is tax-free if all of the following apply:

  • You receive the lump sum
    • within six months of your foreign employment being terminated, and
    • as a consequence of terminating your employment as an employee or as the holder of an office in a foreign country.
  • You were an Australian resident during the period of employment.
  • The lump sum relates only to that period of employment.
  • The lump sum is not exempt from tax under the law of the foreign country.
  • Your earnings or remuneration from the employment are exempt from income tax in Australia.

Termination of employment includes retirement and cessation because of death.

More than six months after gaining residency or ceasing employment

You must include in your assessable income for the year the amount of the lump sum that relates to your applicable fund earnings if you:

  • received the super lump sum from a foreign super fund more than six months after gaining residency or ceasing foreign employment, and
  • were an Australian resident when you received it.

However, you may choose to pay the lump sum into a complying super fund. You can choose to have all or part of your applicable fund earnings included in the assessable income of that fund. If you do, then the amount of the super lump sum that you will include in your assessable income is the applicable fund earnings reduced by the amount of the applicable fund earnings you have chosen to be assessed in the fund.

The remainder of the super lump sum or any part of the super lump sum that is paid into another foreign super fund is tax-free.

Including earnings as assessable income

You may choose to have all or some of your applicable fund earnings included in the assessable income of a complying super fund if you:

  • are an Australian resident
  • receive a lump sum payment from a foreign super fund more than six months after becoming an Australian resident, and
  • pay your lump sum into a complying super fund.

The taxable income of a complying super fund is generally taxed at a concessional rate of 15%, which may be less than the rate you would pay personally.