ATO Interpretative Decision

ATO ID 2003/475 (Withdrawn)

Superannuation

Reasonable benefit limits - residual capital value
FOI status: may be released

This ATO ID is withdrawn from the database because it contains a view in respect of section 140C of the Income Tax Assessment Act 1936. That section does 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 year.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

For reasonable benefit limits (RBL) purposes, does the minimum benefit that is paid by the superannuation fund qualify as a residual capital value (RCV)?

Decision

No, the minimum benefit that is paid by the fund does not qualify as an RCV.

Facts

Two superannuation funds were established by trust deed. They are regulated superannuation funds within the meaning of the Superannuation Industry (Supervision) Act 1993.

Amendments were made to the trust deeds of the two funds. These amendments provide that a minimum amount must be paid in respect of every member. This minimum amount is calculated using a formula.

When the total benefits that have been paid by way of pension (including pension payments to a spouse), are less than the minimum amount, the balance, 'the minimum benefit', is paid to the member's estate or to the member's spouse.

Reasons for Decision

The definition of the term 'residual capital value' in section 140C of the Income Tax Assessment Act 1936 (ITAA 1936) states that the term has the same meaning as in section 27A of the ITAA 1936. It is defined in subsection 27A(1) to mean the 'capital amount' payable on the termination of annuity or superannuation pension.

The RCV must be able to be ascertained so that the capital value of a superannuation pension can be determined for RBL purposes.

Similarly, the amount of the RCV is used in determining the deductible amount of an annuity or superannuation pension as per the formula in subsection 27H(2) of the ITAA 1936. In order that the deductible amount can be calculated the RCV must be a sum certain that is capable of being ascertained on the commencement of the pension or annuity.

On this basis the amount of any RCV must be known when the pension commences and furthermore it is implicitly recognised that the amount of the RCV cannot vary.

The amount of the minimum benefit that is payable in certain circumstances by either of the two funds is incapable of being ascertained when a pension commences. As a result any minimum benefit that is paid cannot be considered to be the RCV of a superannuation pension.

Date of decision: 24 October 2002

Year of income: Year ended 30 June 2002

Legislative References:
Income Tax Assessment Act 1936
   subsection 27A(1)
   subsection 27H(2)
   section 140C

Income Tax Regulations 1936
regulation 53J

Keywords
Annuity & superannuation pension residual capital value
Reasonable benefit limits
Superannuation pensions

Business Line: Superannuation

Date of publication: 20 June 2003

ISSN: 1445-2782

history

	Date:	Version:
	24 October 2002	Original statement
You are here	16 November 2007	Archived

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