ATO Interpretative Decision
ATO ID 2002/369
Superannuation
Part IX taxation of superannuation entities: Special income of superannuation fundsFOI status: may be released
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Is the dividend income paid to a superannuation fund by a private company 'special income' of the fund within the meaning of section 273 of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
No. The Commissioner of Taxation (Commissioner) exercised the discretion available in subsection 273(2) of the ITAA 1936 to determine that the dividends did not constitute 'special income' of the company.
Facts
A superannuation fund holds shares in a private company. The private company is the holding company of another private company which deals in franchises. The trustee of the superannuation fund is a franchisee (through a family trust) of the franchise operation of the subsidiary company.
Neither the trustee of the fund or the members of the fund are directors or shareholders of the private holding company or of the subsidiary company.
The amount of dividends paid to the superannuation fund was the same as the amount paid to other shareholders of the private company.
Reasons for Decision
The Commissioner's discretion under subsection 273(2) of the ITAA 1936 is exercised to determine whether the dividends paid to a superannuation fund from a private company constitute 'special income' of the fund. Income is determined to be 'special income' if the parties to the transaction are not dealing with each other at arm's length and that income is greater than the income that might have been expected to be derived by the entity from the transaction if those parties had been dealing with each other at arm's length.
The factors taken into consideration in reaching the conclusion that the dividends did not constitute 'special income' included the following:
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- the shares were acquired at approximately the market value at the time of the acquisition. Therefore, the acquisition of the shares was an arm's length transaction;
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- the dividends paid were identical for all shares issued in the company;
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- there were no shares issued by the company in satisfaction of the dividends; and
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- neither the trustees or members of the fund have any direct relationship with the company in which the fund holds the shares.
Year of income: 30 June 1996
Legislative References:
Income Tax Assessment Act 1936
section 273
subsection 273(2)
Other References:
Previously released as CDS10190
Keywords
Superannuation fund income
Superannuation funds
Private company distributions
Special income of superannuation funds
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 24 July 1997 | Original statement |
| 8 September 2006 | Archived |
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