8 September 2000 External T.I. 2000-0029535 - FOREIGN PENSION PLAN ANNUITY

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Will amounts received from an Australian annuity contract qualify as a pension for purposes of the Act?

Position: Yes.

Reasons: Since one of the payment options under the individual's pension plan included the acquisition of an annuity with the commuted value of the individual's pension benefits under the pension plan, we would consider the annuity payments to be pension payments for purposes of the Act.

XXXXXXXXXX 								2000-002953
M. P. Sarazin
September 8, 2000

Dear Sir\Madam:

Re: Australian Allocated Annuity

This is in response to your letters of May 19 and June 22, 2000, requesting a ruling with respect to the taxation of amounts received from an Australian Allocated Annuity.

You were a member of a pension plan sponsored by your former employer. The pension benefits were primarily funded with contributions made by your employer. When you retired, you could have received a pension and you were given the option of receiving the commuted value of your pension entitlements as a lump-sum payment or the pension plan could have used the commuted value of the pension benefits to acquire an annuity in your name. In order to defer taxes under Australian income tax laws, an AMP MultiFund Flexible Income Plan Allocated Annuity (the "Annuity") was acquired in your name.

You moved to Canada in XXXXXXXXXX and you are receiving the payments under the Annuity. The Australian Taxation Office has provided you with an income tax ruling that the Annuity payments paid to you while you are a Canadian resident will be subject to a 15% withholding tax. You want to know how the Annuity payments will be taxed in Canada.

Comments

In your letter you have outlined an actual fact situation related to completed transactions. As noted in Information Circular 70-6R3 (available at your local tax services office or on the internet at www.ccra-adrc.gc.ca/formspubs/menu-e.html), this directorate can only provide advance income tax rulings in respect of specific proposed transactions. We must advise you that the review of completed transactions falls within the responsibility of tax services offices. Consequently, we can only provide you with the following general comments.

It appears that the annuity payments represent one of the forms of payment available under your former employer's pension plan. Consequently, we would take the view that the Annuity payments would constitute pension benefits for purposes of the Income Tax Act (the "Act"). Pension benefits are taxed for the year of receipt pursuant to subparagraph 56(1)(a)(i) of the Act.

We trust that the above comments will be of assistance.

Yours truly,

Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate