6 November 2008 External T.I. 2008-0293061E5 - Australian Pension Transfer to Canada

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.

Principal Issues: Can a lump sum payment made out of an Australian pension plan be transferred to an RRSP on a tax-deferred basis?

Position: Yes, provided the payment is in respect of non-resident services.

Reasons: Clearly provided for by paragraph 60(j)

						2008-029306
XXXXXXXXXX  					Dave Wurtele
(613) 957-2093
November 6, 2008

Dear XXXXXXXXXX :

Re: Australian Pension Transfer to Canada

This is in reply to your letter of August 26, 2008 in which you requested our views on the possibility of transferring funds from an Australian pension plan to a Canadian registered retirement savings plan ("RRSP") on a tax-deferred basis.

We understand the facts to be as follows: You resided in Australia from XXXXXXXXXX during which time you were employed by the XXXXXXXXXX . In connection with your employment, you accrued benefits in the New South Wales State Superannuation Scheme ("NSWSSS"). The NSWSSS is a defined benefit pension plan funded by both employee and employer contributions. When you moved to Canada in XXXXXXXXXX , you left your deferred pension in the NSWSSS intending to receive a pension when you turned 60 years of age. However, you retained the option to elect to receive a lump sum payment in lieu of your entitlement to a deferred pension. As a result of recent tax changes in Australia, which made superannuation benefits non-taxable if paid to individuals aged 60 or older, you would like to transfer your NSWSSS funds into Canada.

You have asked for our views on whether you would be entitled to claim a deduction under paragraph 60(j) of the Income Tax Act ("Act") for a lump sum transfer from the NWSSS to your RRSP. You have also asked whether the transfer may be made indirectly and whether it would be subject to your regular RRSP deduction limit.

Our Comments

The particular circumstances outlined in your letter relate to a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R5, Advance Income Tax Rulings, this Directorate does not comment on transactions involving specific taxpayers except by way of an advance income tax ruling in respect of proposed transactions. When the situation involves a completed transaction, the question should be directed to the appropriate Tax Services Office for their views, along with all relevant facts and documentation. However, we are prepared to offer the following general comments which may be of assistance. These comments are not binding on the Canada Revenue Agency (CRA). The publications referred to in this letter are available on the CRA website at http://www.cra-arc.gc.ca/formspubs.

The CRA's general views regarding the transfer of amounts from non-registered pension plans to Canadian registered plans are found in Interpretation Bulletin IT-528 Transfers of Funds Between Registered Plans. Paragraph 26 of IT-528 discusses the application of subparagraph 60(j)(i) of the Act which allows a special deduction for a pension benefit received by an individual from a non-registered pension plan (such as a foreign pension plan) that is transferred to a registered pension plan (RPP) or a registered retirement savings plan (RRSP). Since you are not contemplating a transfer to an RPP, we will restrict our general comments to transfers to RRSPs.

The following conditions have to be satisfied for an individual to deduct an amount under subparagraph 60(j)(i) of the Act in computing their income for a taxation year.

• The foreign plan must constitute a superannuation or pension plan for purposes of the Act. The determination of whether a plan is a superannuation or pension plan is a question of fact. Generally, a plan will be considered to be a superannuation or pension plan where contributions have been made to the plan by or on behalf of an employer or former employer of an employee in consideration for services rendered by the employee and the contributions are used to provide an annuity or other periodic payment on or after the employee's retirement. In this regard, there is nothing in your correspondence which would indicate that the NSWSSS is not a superannuation or pension plan.
• The pension benefit must not be part of a series of periodic payments. Only lump sum payments are eligible for the deduction.
• The pension benefit must be attributable to services rendered by the individual (or the individual's spouse or common-law partner) to an employer in a period throughout which the individual was not resident in Canada.
• The pension benefit must be included in the individual's income for the year and not exempt from tax in Canada because of an income tax treaty. In this regard, the Act provides for pension benefits to be included in the recipient's income in the year received and the Canada-Australia Income Tax Convention does not limit Canada's right to tax pension payments received from an Australian pension plan by a Canadian resident.

The individual must make the RRSP contribution in the year the pension benefit is received or within 60 days after the end of that year. There is no requirement that the RRSP contribution be made by way of a direct transfer from the foreign pension plan. In addition, the individual must designate the RRSP contribution as a transfer in their personal income tax return for the year. The amount of the deduction is limited to the lesser of the amount designated and the amount of the benefit included in income. The deduction is over and above an individual's regular RRSP deduction limit.

We trust that these comments will be of assistance.

Yours truly,

Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch