• R6 Transfer of liability to life insurance company or PST

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Show at R6 the amount of income, that is otherwise assessable to the fund for the income year, that the trustee of the complying superannuation fund or a complying approved deposit fund (the ‘transferor’) has transferred to a life insurance company or PST (transferee) pursuant to an agreement with that transferee entity. The amount of the income transferred is included in the transferee entity’s assessable income instead.

    The fund (transferor) must hold sufficient investments in the transferee entity to cover the tax payable by the transferee entity as a result of the transfer.

    The total amount transferred by the fund under all such agreements cannot exceed the amount that would otherwise have been included in the fund’s assessable income 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 the fund’s 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; it cannot be transferred to the life insurance company or PST. (If a member provides their TFN in a subsequent year, a tax offset can be claimed see further information at E2 No-TFN tax offset item 12.)

    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 subsection 295-260(6) of the ITAA 1997). The fund has $10,000 of assessable contributions (shown at R Assessable contributions).

    The taxable income of the fund is calculated as follows:

     

    Amount

    Rate

    Tax

    Income

    Employer contributions

    10,000

    15%

    $1,500

    Total

    $10,000

     

    $1,500

    less

    Contributions excluded

    Transfer to life company

    10,000

    15%

    $1,500

    Total

    $10,000

     

    $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 was for members who quoted their TFNs (shown at R1 Assessable employer contributions).

    The fund has transferred all its assessable contributions to a life insurance 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 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 contributions and is shown at J Tax on no-TFN quoted contributions and included at B Gross tax item 12.

     

    Amount

    Rate

    Tax

    Income

    TFN quoted contributions plus

    No-TFN quoted contributions

    $8,000

    $2,000

    15%

    46.5%

    $1,200

    $930

    Total

    $10,000

     

    $2,130

    Less

    Contributions excluded

    Transfer to life company

    $10,000

    15%

    $1,500

    Total reduction of assessable income

    $10,000

     

    $1,500

    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.

    End of example

    G Foreign exchange gains

    Show at G assessable foreign exchange gains (from both foreign and domestic sources) made by the fund. See.

    Even if the TOFA rules apply to the fund, show at G all assessable foreign exchange gains.

    If what you show at G includes an amount brought to account under the TOFA rules, also complete item 16 Taxation of financial arrangements (TOFA).

    See also:

    Guide to the taxation of financial arrangements (TOFA) rules

    Last modified: 02 Jun 2014QC 35420