This Determination, released on Wed 13.11.2013, states that a contribution made to a complying superannuation fund in one financial year (year 1), but not allocated to a fund member until the subsequent financial year (year 2), is only included in the member’s “concessional contributions” for year 2 under s291-25(3) of the Income Tax Assessment Act 1997 (‘ITAA 1997’).
The Commissioner notes that reg 292-25.01 of the Income Tax Assessment Regulations 1997 or ‘ITA Regs’ was made for the purposes of former s 292-25(3) of the ITAA 1997, but he still considers that it sets the conditions for concessional contributions to be allocated in a complying superannuation plan – that is in a way covered by the new s 291-25(3) of the ITAA 1997 from 1 July 2013.
To avoid a double taxation outcome, the Commissioner considers that a contribution “received” by a fund in year 1 but not “allocated” until year 2 (within the time limits in Div 7.2 of the SIS Regs) should not also be included in the member’s concessional contributions under s291-25(2) for year 1 (ie the year in which the contribution was “received” by the fund).
In this respect, the Determination provides some support for aspects of contribution reserving strategies and the use of suspense accounts for concessional contributions. Broadly, a reserving strategy may enable a taxpayer to maximise a deduction for a personal super contribution for one particular financial year without breaching the concessional contributions caps over a 2-year period. In basic terms, a contribution reserving strategy (made in compliance with this Determination) relies on the different timing rules for a contribution for deduction purposes and allocations for Div 291 purposes.
The Determination includes an example whereby Harry’s concessional contributions cap for the 2013-14 financial year is $25,000. Harry makes a personal contribution of $25,000, which is received by his complying fund on 30 June 2014. The trustees apply this amount to an unallocated contributions account established in accordance with the governing rules of the fund. On 2 July 2014, the trustees allocate the amount of $25,000 to Harry’s member account in the fund with effect from 2 July 2014. Harry’s contribution is covered by a valid and acknowledged notice given to his fund under s 290-170 of the ITAA 1997 of his intention to deduct the amount of the contribution. The Tax Office says the $25,000 contribution is included in the amount of Harry’s concessional contributions for the 2014-15 financial year as an amount covered under s 291-25(3) of the ITAA 1997.
DATE OF EFFECT: The Determination applies to contributions made on or after 1 July 2013 and amounts allocated with effect from 1 July 2013 (including an allocation from 1 July 2013 for a contribution made before 1 July 2013).
The Determination was not previously issued as a draft.
[LTN 220, 13/11/13]
s 291-25(3) of the ITAA 1997 – Your concessional contributions for a financial year
(1) The amount of your concessional contributions for a * financial year is the sum of:
(a) each contribution covered under subsection (2); and
(b) each amount covered under subsection (3).
Note: For rules about defined benefit interests, see Subdivision 291-C.
(2) A contribution is covered under this subsection if:
(a) it is made in the * financial year to a * complying superannuation plan in respect of you; and
(b) it is included in the assessable income of the * superannuation provider in relation to the plan, or, by way of a * roll-over superannuation benefit, in the assessable income of a * complying superannuation fund or * RSA provider in the circumstances mentioned in subsection 290-170(5) (about successor funds) or subsection 290-170(6) (about MySuper products); and
(c) it is not any of the following:
(i) an amount mentioned in subsection 295-200(2);
(ii) an amount mentioned in item 2 of the table in subsection 295-190(1);
(iii) a contribution made to a * constitutionally protected fund .
(3) An amount in a * complying superannuation plan is covered under this subsection if it is allocated by the * superannuation provider in relation to the plan for you for the year in accordance with conditions specified in the regulations.
(4) Disregard Subdivision 295-D for the purposes of paragraph (2)(b).
Reg 292-25.01 of the ITA Regs – Concessional contributions for a financial year
(1) For subsection 292-25(3) of the Act, this regulation sets out conditions for the purpose of allocating an amount in a complying superannuation plan.
Note: The effect of subsection 292-25(3) of the Act is that an amount in a complying superannuation plan is covered under that subsection if it is allocated by the superannuation provider in relation to the plan for the year in accordance with conditions specified in the Regulations.
(2) Subject to subregulation (3), an amount that is:
(a) allocated under Division 7.2 of the SIS Regulations; and
(b) an assessable contribution under Subdivision 295-C of the Act;
is to be treated as having been allocated by the superannuation provider in a way that is covered by subsection 292-25(3) of the Act.
(3) Each of the following amounts is to be treated as not having been allocated by the superannuation provider in a way that is covered by subsection 292-25(3) of the Act, even if subregulation (2) would also apply to the amount:
(a) an amount mentioned in item 2 of the table in subsection 295-190(1) of the Act;
(b) an amount mentioned in subsection 295-200(2) of the Act;
(c) a contribution made to a constitutionally protected fund .
(4) An amount that is allocated from a reserve, other than an amount that is covered by subregulation (2), is to be treated as having been allocated by the superannuation provider in a way that is covered by subsection 292-25(3) of the Act:
(a) unless:
(i) the amount is allocated, in a fair and reasonable manner:
(A) to an account for every member of the complying superannuation plan; or
(B) if the member is a member of a class of members of the complying superannuation plan, and the amount in the reserve relates only to that class of members–to an account for every member of the class; and
(ii) the amount that is allocated for the financial year is less than 5% of the value of the member’s interest in the complying superannuation plan at the time of allocation; or
(b) unless:
(i) the amount is allocated from a reserve used solely for the purpose of enabling the fund to discharge all or part of its liabilities (contingent or not), as soon as they become due, in respect of superannuation income stream benefits that are payable by the fund at that time; and
(ii) any of the following applies:
(A) the amount has been allocated to satisfy a pension liability of the plan paid during the financial year;
(B) on the commutation of the income stream, except as a result of the death of the primary beneficiary, the amount is allocated to the recipient of the income stream, to commence another income stream, as soon as practicable;
(C) on the commutation of the income stream as a result of the death of the primary beneficiary, the amount:
(I) is allocated to a death benefits dependant to discharge liabilities in respect of a superannuation income stream benefit that is payable by the plan as a result of the death; or
(II) if sub-sub-subparagraph (I) does not apply–is paid as a superannuation lump sum and as a superannuation death benefit;
as soon as practicable.
(5) Paragraph (4)(a) does not apply to an amount that:
(a) is required to be allocated under subregulation (2); or
(b) would be assessable income of the plan if it were made as a contribution.
(6) If the amount has been allocated from a reserve in lieu of a contribution to the fund (less any allowance for tax) which would have been assessable income of the fund, the amount that is allocated is to be multiplied by 1.176.
Example: An employer has an obligation to make a id=”mce_marker”,000 contribution. Instead of the employer making a contribution to the fund, the trustee allocates $850 to the member’s account (which is an amount equivalent to the amount that would be credited to the account after tax was paid).
For subregulation (6), the amount of $850 is to be multiplied by 1.176 to work out the amount that is taken to be allocated.