• 7. Release authority

    7.1 The Commissioner

    7.2 The person

    7.3 Super providers

    7.4 Summary of types of release authority

    7.5 Income tax implications.

    Division 293 tax may be paid from a person’s own money or, in certain circumstances, from their super interest using a release authority. Special provisions allow a person to give a release authority to their super provider which sets out certain conditions for the payment of the liability.

    A release authority is issued to a person by the Commissioner because they are prevented from withdrawing money from super interests until they reach preservation age or retire.

    If the person dies before the Division 293 tax liability has been paid, the outstanding liability must be paid from the deceased person’s estate. A release authority will not be issued to the trustee of a deceased estate.

    A release authority is valid for 120 days from the date of issue.

    7.1 The Commissioner

    As outlined in section 135-10External Link of Schedule 1 to the TAA, as soon as practicable after making an assessment of due and payable Division 293 tax, or an amended assessment resulting in additional Division 293 tax being payable, the Commissioner must issue a release authority to the person. This release authority enables the person to have an amount released from a super interest (other than a defined benefit interest) to pay all or some of the amount of their Division 293 tax liabilities.

    Requirements for release authority

    The release authority issued by the Commissioner must:

    • state the amount of the release entitlement (the maximum amount of money that the release authority authorises to be released by a super provider)
    • be dated
    • contain any other information the Commissioner considers relevant.

    Commissioner may issue a further release authority

    In accordance with subsection 135-10(3)External Link of Schedule 1 to the TAA, the Commissioner may re-issue or vary a release authority, or issue a further release authority if he is satisfied it is reasonable to do so.

    A release authority can be given by the Commissioner directly to the super provider and, in that case, the payment must be made by the provider to the Commissioner. The Commissioner must, as soon as possible, give the person written notice that the payment has been made.

    Allowing the Commissioner to directly obtain money from a super provider gives the Commissioner an additional mechanism to enforce payment of outstanding liability for assessed Division 293 tax that is due and payable.

    7.2 The person

    There are three types of release authorities issued to a person:

    1. A release authority is issued with a notice of assessment for a due and payable debt. A person can choose to use the release authority to withdraw an amount equal to, or part of, their assessed Division 293 tax from super interests (other than defined benefit interests unless it is issued because of the member is taking a benefit). The payment can be made directly to the ATO or to the person themselves.

    If a person decides to use the release authority, they must complete the relevant information on the form and forward this to their super provider. The super provider has 30 days to comply with the release authority.

    Should a person wish to pay the debt from more than one fund they can photocopy the release authority before it is signed by them and then send the release authority to each relevant fund.

    1. A release authority will be issued in respect of each deferred tax determination made. The person can opt to use the release authority to pay their deferred debt. The release authority can be only issued to an accumulation fund, not the defined benefit fund. The payment in respect of this debt can only be paid direct to the ATO.

    These are voluntary payments used to reduce the deferred liability.

    1. A release authority will be issued with the debt account discharge liability notice. This release authority can only be given to the super provider to which the liability relates. The payment must be made to the ATO.

    A person is subject to an administrative penalty and taxation consequences if they have amounts released from super interests which exceed the amount of the release entitlement.

    Release authorities cannot be issued to deceased estates (section 135-10(4) of Schedule 1 to the TAA).

    7.3 Super providers

    As outlined in section 135-75 of Schedule 1 to the TAA, super providers that are given a release authority for payment from a super interest must pay the amount within 30 days of receiving the release authority. This ensures that amounts are paid within a reasonable period, while ensuring that super providers have sufficient time to facilitate payments.

    Release authorities that must be actioned by super providers are those which are issued to allow a payment in respect of:

    • an original or amended assessment of Division 293 tax
    • the amount of a determination or amended determination of defined benefit tax deferred to a debt account
    • the amount of debt account discharge liability.

    Who release amount is paid to

    A payment under a release authority must generally be made to the Commissioner. However, a person may direct their super provider to release money to themselves where the release authority is issued in relation to an assessment, (or amended assessment), to the extent that it is payable within 21 days. This recognises the fact that such assessments are due and payable within 21 days; however, super providers have 30 days to action a release authority.

    A person may choose to pay the tax liability from other sources by the due and payable date and separately obtain the amount from the super fund to compensate for this payment. The payment for a release authority can be made out of one or more super interests held by the super provider for the person.

    Defined benefit interests

    The debt account discharge liability can be paid from a defined benefit interest once an end benefit has become payable.

    Where the super provider makes a payment authorised by a release authority the payment is a super benefit.

    If the release authority is given for an amount of assessed Division 293 tax that is deferred to a debt account or a debt account discharge liability, the payment may only be made to the Commissioner.

    If a release authority is given by the Commissioner to a super provider, the payment must be made to the Commissioner.

    Reporting obligations

    Where a person or the Commissioner has requested a super provider pay a liability (by providing a release authority) using the person’s super monies and the super provider has acted on that authority, the super provider must supply information to the Commissioner.

    The Commissioner must be given a statement in the approved form within 30 days of the amount being paid from the person’s interest. The approved form must include details of the release authority provided to the super provider by either the person or the Commissioner.

    Release amount

    A super provider that makes a payment under a release authority must pay the lesser of the following amounts:

    • the amount the release authority was issued for, or
    • a lower amount specified, by the person or the Commissioner, in the release authority, or
    • the total amount of all the super lump sums of all the super interests held by the super provider for the person (this recognises that an amount cannot be paid to the extent it exceeds the sum held).

    On 17 December 2013, changes were made to the Superannuation Industry (Supervision) Regulations (SISR) to:

    • make amendments to standards and definitions for pensions and annuities to allow for payments in compliance with a release authority, where appropriate
    • to include new conditions of release to allow payments to be made from superannuation entities where required or allowed by release authorities, under Division 135, Schedule 1 to the TAA (for Division 293 tax).

    Administrative penalty

    An administrative penalty of 20 penalty units ($3,400) may apply if a super provider fails to comply with a release authority:

    • to the extent that funds are available or
    • by releasing an amount in excess of the amount required to be released.

    The payment for a release authority can be made out of one or more super interests held by the super provider for the person.

    Under section 4AA of the Crimes Act 1914, a penalty unit equals $180.

    Exercise 14

    Work it out

    Select all that apply:

    Which of the following must the release authority issued by the Commissioner contain?

    (a) The date.

    (b) The amount of the release entitlement.

    (c) Any other information the Commissioner thinks is relevant.

    (d) All of the above.

    Answer 14

    Exercise 15

    Work it out

    Is the following statement true or false?

    A person must pay their Division 293 tax from super interests.

    Answer 15

    Exercise 16

    Work it out

    Select the correct response.

    How many days does the super provider have to release the amount once they have received the release authority?

    (a) 7 days.

    (b) 14 days.

    (c) 21 days.

    (d) 28 days.

    (e) 30 days.

    Answer 16

    7.4 Summary of types of release authority

    An overview of the operation of release authorities, and the circumstances in which they can be issued by the Commissioner, and given by a person are set out in the table below.

    Release Authorities cannot be issued to deceased estates (subsection 135-10(4) of Schedule 1 to the TAA).

     

    For assessed Division 293 tax due and payable

    For assessed Division 293 tax that is deferred to a debt account

    For a debt account discharge liability

    Commissioner gives release authority direct to the provider for assessed Division 293 tax due and payable

    Obligation of Commissioner to issue release authority

    Commissioner must issue release authority to the person.

    Commissioner may give such a release authority directly to the provider.

    Time people can give a release authority within

    Person may give release authority to provider within 120 days of issue.

    N/A

    Recipient of release authorities

    One or more super providers with an interest other than a defined benefit interest for the person.

    Only the super provider that holds the defined benefit interest to which the debt account relates.

    One or more super providers with an interest other than a defined benefit interest for the person.

    Provider's obligation to pay

    Lesser of:

    • the amount the release authority was issued for
    • a lower amount specified by the person in the release authority, or
    • the sum of all the super lump sums that could be payable from the interests held by the super provider for the person.

     

    Lesser of:

    • the amount specified by the Commissioner on the release authority, or
    • the sum of all the super lump sums that could be payable from the interests held by the super provider for the person.

     

    Obligation to comply by the provider

    Provider must comply within 30 days of receiving the release authority.

    Recipient of released money

    The individual or the Commissioner.

    Only the Commissioner.

    Advise the Commissioner and the individual.

    • Where the payment is made to the individual, the provider must send the Release authority Statement to the individual within 30 days.
    • Where the payment was made to the ATO they must send the Release authority Statement within 30 days to the ATO and provide a copy to the individual.

     

    7.5 Income tax implications

    Section 303-20External Link provides that where funds are released in accordance with a release authority, they are non-assessable non-exempt income.

    Treatment of excess payments from release authorities

    If payments made in relation to a release authority are in excess of the amount of the release entitlement, the excess amount is assessable income of the person, in accordance with section 304-20External Link.

    This ensures that a person who, for example, provides multiples copies of a release authority to different super providers and the total amount released from super is in excess of the amount of the release entitlement stated on the release authority, is liable to pay income tax at their marginal tax rate on the excess amount.

    If the Commissioner issues a further release authority, then the excess amount included in the person’s assessable income is the amount released from super that is in excess of the issued amount of the original release authority only.

    Administrative penalty

    A person is liable to an administrative penalty of 20 penalty units ($3,400) under subsection 288-100(2)External Link of Schedule 1 to the TAA if the total amount released from super exceeds the amount of the release entitlement stated on the release authority by the Commissioner.

      Last modified: 15 May 2015QC 43294