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Edited version of private advice

Authorisation Number: 1051843855442

Date of advice: 31 May 2021


Subject: Exempt current pension income


Is Trust X's approach in calculating exempt income referable to investments held by its unitholders on behalf of their pension members in accordance with subsection 295-400(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?



This ruling applies for the following period:

1 July 20XX to 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

1.            Trust X is a pooled superannuation trust (PST) within the meaning of section 48 of the Superannuation Industry Supervision Act 1993 (SISA) and a complying superannuation entity pursuant to section 995-1 of the ITAA 1997 for which A Co is the trustee.

2.            A Co is responsible for the management and investment of the assets of a number of superannuation funds which holds units in Trust X.

3.            Trust X has many different classes of units including the taxed units and untaxed units held by the unitholder superannuation funds for their members who are in accumulation phase and pension phase.

4.            Trust X proposes an approach to calculate the exempt pension income of Trust X for the pension options under subsection 295-400(3) of the ITAA 1997 based on its interpretation of the intent of the provision.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 295F

Income Tax Assessment Act 1997 section 295-385

Income Tax Assessment Act 1997 section 295-390

Income Tax Assessment Act 1997 section 295-400

Income Tax Assessment Act 1997 subsection 295-400(1)

Income Tax Assessment Act 1997 subsection 295-400(3)

Income Tax Assessment Act 1936 section 297B

Reasons for decision

All legislative references are to the Income Tax Assessment Act 1997 unless otherwise specified.

A complying superannuation fund is entitled to an exemption for so much of its ordinary income or statutory income as is attributable to its liability to pay current pensions liabilities. The exempt income is generally referred to as exempt current pension income (ECPI). Subdivision 295F sets out the relevant methods in calculating the exempt income amount.

Under section 295-385 a complying superannuation fund is exempt from tax on income from its segregated assets set aside in order to meet current pension liabilities.

Section 295-390 outlines the proportionate method which provides a formula for calculating the proportion of exempt pension income. The proportion of exempt income is expressed as the proportion of the average value of current pension liabilities (excluding liabilities for which segregated current pension assets are held) to the average value of superannuation liabilities.

Specifically for PSTs, subsection 295-400(1) sets out a formula for calculating the proportion of exempt income of a PST based on the average number of units held in the PST that are segregated current pension assets. It provides:


This proportion of the *ordinary income and *statutory income that would otherwise be assessable income of a *pooled superannuation trust is *exempt income:

Average number of units in the trust during the income year that are *segregated current pension assets of unitholders that are *complying superannuation funds

Average number of units in the trust during the income year

Subsection 295-400(3) provides an alternative method to exempt amounts of assessable income of the PST. It states:

Alternative exemption


However, the trustee of the *pooled superannuation trust can choose that a different amount be *exempt income of the trust under this section if a percentage of the assessable income of the trust would have been exempt income under section 295-385 or 295-390 if it had been *derived instead by the unitholders in the trust in proportion to their holdings.

The Applicant provided information to the Commissioner which illustrates that the approach used to self-assess the ECPI is valid and workable and that the exempt pension income calculated under Trust X's approach is equivalent to that which would have been claimable under section 295-385 by the unitholder superannuation funds had they held the assets directly.

Having regard to the information provided, the Commissioner is satisfied that the approach used by Trust X in calculating its ECPI is in accordance with the policy intent of the legislation.