R6 Transfer of liability to life insurance company or PST

Show at R6 the amount of income otherwise assessable for the income year, under Subdivision 295-C of the ITAA 1997, that the trustee of a complying superannuation fund or a complying approved deposit fund (the 'transferor') has agreed to transfer to a life insurance company or PST (the 'transferee') in which the fund holds investments. The amount of the transfer will be included in the transferee entity's assessable income instead. The transferor fund must hold sufficient investments in the transferee entity to cover the tax payable by the transferee as a result of the transfer. The total amount transferred cannot exceed the amount that would otherwise have been included in the assessable income of the transferor under Subdivision 295-C of the ITAA 1997.

The agreement to transfer must be in writing, signed by both parties, must be made before the lodgment of this tax return, and cannot be revoked. The trustee can only make one agreement for an income year with a particular transferee.

R6 is used to determine R Assessable contributions.

Record keeping

Keep all relevant documents as evidence of the transferee's consent to accept the transfer of assessable contributions and the associated tax liability.

Example 3 should assist you in dealing with member contributions where the fund has transferred its tax liability to a life insurance company or PST. The 31.5% additional tax in respect of the no-TFN quoted contributions must be paid by the fund, and the liability cannot be transferred to the life insurance company or PST.

Example 3: Superannuation fund transferring its liability

Example 3a: Complying superannuation fund where all members have quoted their TFNs

A complying superannuation fund can transfer its tax liability on assessable contributions to a life insurance company or PST in which it holds investments, provided the requirements of section 295-260 of the ITAA 1997 are satisfied. The effect of the agreement is that the transferee investment vehicle pays the tax on the fund's behalf.

The Natalie Superannuation Fund is a complying fund that is transferring its tax liability to a life insurance company (shown at R6 Transfer of liability to life insurance company or PST). The fund has sufficient investments in the transferee life insurance company to cover the tax payable by the transferee as a result of the transfer (calculated under section 295-260(6) of the ITAA 1997). The fund has $10,000 of assessable contributions (R Assessable contributions).

The taxable income of the fund is calculated as follows:

			Amount	Rate	Tax
	Income
	Total	Employer contributions	10,000 $10,000	15%	$1,500 $1,500
		less
	Contributions excluded
	Total	Transfer to life company	10,000 $10,000	15%	$1,500 $1,500
	Taxable income and gross tax		NIL		NIL

Example 3b: Complying superannuation fund with no-TFN quoted contributions

Superannuation funds cannot transfer the additional tax liability caused by no-TFN quoted contributions to a life insurance company or a PST.

The James Superannuation Fund is a complying fund. However, it has income which is taxed at different rates.

The fund has $10,000 of assessable contributions (shown at R Assessable contributions). Of the total employer contributions, $2,000 was for members who had not quoted their TFN (shown at R3 No-TFN quoted contributions) while the remaining $8,000 of contribution was for members who quoted their TFNs (shown at R1 Assessable employer contributions).

The fund has transferred all of its assessable contributions to a life company (shown at R6 Transfer of liability to life insurance company or PST). However, it must still pay the additional tax on the no-TFN quoted contributions income as the following table shows. The total rate of tax that applies to the no-TFN- quoted contributions income is 46.5% (which is made up of 15% paid by the life insurance company or PST and an additional 31.5% paid by the fund). Even though the fund has transferred 100% of the contributions received and has a nil taxable income, it is still liable for $630 tax for the no-TFN quoted contributions. The tax amount of $630 is 31.5% of the $2,000 no-TFN quoted contribution and is shown at J No-TFN quoted contributions tax and included at B Gross tax item 12.

					Amount	Rate	Tax
	Income
		TFN quoted contributions plus			$8,000	15%	$1,200
	Total	No-TFN quoted contributions			$2,000 $10,000	46.5%	$930 $2,130
		Less
	Contributions excluded
		Transfer to life company			$10,000 $10,000	15%	$1,500 $1,500
	Total reduction of assessable income
	Taxable income and gross tax				NIL		$630

The gross tax of $630 (plus any other amounts payable) is payable even though the fund has transferred 100% of the contributions it received and has a nil taxable income.