While still residing in Australia, the taxpayer and her (now ex-)husband created an Australian Self-managed Super Fund (“SMSF”), being an Australian superannuation fund that is operated solely for the purpose of providing retirement benefits for the members or their dependants. The taxpayer and her ex-husband were the original members of the SMSF, and they were the only directors of the SMSF corporate trustee.
Prior to the taxpayer’s immigration to Canada, contributions to the SMSF were made both by the taxpayer and her husband, as both concessional (i.e., pre-tax) and non-concessional (i.e. after-tax) contributions, and by her husband’s employer as concessional contributions. Her ex-husband received a portion of the SMSF assets as part of their divorce settlement, following which she became the sole beneficiary.
The income of the SMSF was subject to Australian tax at a flat rate of 15%, or 10% in the case of long-term capital gains, and all benefits paid to the taxpayer are free of Australian tax given her age. CRA stated:
Based on the fact that contributions were made to the SMSF by an employer of the taxpayer’s ex-husband in consideration for his employment services and that the sole purpose of the SMSF is to provide retirement benefits to its members, it is reasonable to conclude that the SMSF is a pension plan for purposes of the Act. The fact that the taxpayer’s ex-husband previously received a portion of the SMSF assets in full satisfaction of his interest in the SMSF would not cause the plan to cease to be a pension plan for purposes of the Act. Accordingly, any payments received out of or under the SMSF by the taxpayer would be included in her income under subparagraph 56(1)(a)(i) in the year of receipt. It is not relevant that some contributions made to SMSF by the taxpayer were not deductible, or that the benefits are not taxable, under Australian income tax law.