ATO Interpretative Decision
ATO ID 2002/717 (Withdrawn)
Superannuation
Reasonable benefit limits (RBLs): Transitional RBLs and Highest Average SalaryFOI status: may be released
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This ATO ID is withdrawn from the database because it contains a view in respect of Division 14 of Part III of the Income Tax Assessment Act 1936 and Part 5A of the Income Tax Regulations 1936 (the RBL provisions). The RBL provisions do not apply for the 2007-08 income year and later income years. This ATO ID continues to be a precedential view in respect of decisions for income years up to, and including, the 2006-07 income years.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Can the assigned income of the taxpayer in a partnership be included in the calculation of the taxpayer's Highest Average Salary (HAS) for transitional RBL purposes?
Decision
No. As the assigned income does not form part of the 'net business income' of the assignor/taxpayer, it cannot be included as 'salary' in the calculation of the taxpayer's HAS under the Income Tax Regulations (the Regulations).
Facts
The taxpayer had assigned a large percentage of personal interest and rights in a partnership business to the trustee of the taxpayer's family trust.
Reasons for Decision
Division 2 of Part 5A of the Regulations prescribes the rules for the calculation of a transitional RBL. The determination of the transitional RBL is based on the person's HAS as defined in subregulation 47(1) of Division 1 of Part 5A of the Regulations. 'Salary" is essentially income from personal exertion from all sources in a financial year. A person's salary is increased by their share of 'net business income', or reduced by their share of 'net business losses' from a business carried on either alone or in partnership (paragraph 47(3)(b) of Division 1 of Part 5A of the Regulations).
The taxpayer had assigned a large percentage of personal interest and rights in a partnership business to the trustee of the taxpayer's family trust.
When a partner assigns their interest in a partnership, the assignor has effectively forgone the right to receive some or all of their share of the partnership income. Tax on the assigned income is paid by the assignee, as the assigned income is not included in the net partnership income of the assignor. This is consistent with the findings of the High Court in FCT v Everett (1980) CLR 440.
Date of decision: 10 July 1997
Legislative References:
Income Tax Regulations
Division 1 of Part 5A
Division 2 of Part 5A
subregulation 47(1) Income Tax Regulations
paragraph 47(3)(b)
Case References:
FCT v Everett
(1980) 143 CLR 440
(1980) 80 ATC 4076
(1980) 10 ATR 608
Other References:
Previously released as CDS10123
Keywords
Reasonable benefit limits
Transitional RBLs
Salary
Everett assignment
Assignment of rights and entitlements
Partnership interests
ISSN: 1445-2782
| Date: | Version: | |
| 10 July 1997 | Original statement | |
| You are here | 23 November 2007 | Archived |