ATO Interpretative Decision

ATO ID 2005/141 (Withdrawn)

Superannuation

• This ATO ID is withdrawn, as it is no longer necessary. The ATO view expressed in this ATO ID is a straight application of the law and does not contain an interpretative decision. Guidance on the view contained in this ATO ID can be found in Employees ( QC 50360).
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Can a fund, selected by an employee who is a member of a defined benefit scheme become a chosen fund for the member under section 32Fof the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Decision

No. A fund selected by an employee who is a member of a defined benefit scheme cannot become a chosen fund for the member under section 32F of the SGAA by virtue of subsection 32F(3), as none of the powers under the trust deed of the defined benefit scheme are exercised as a result of the member making a choice. The member remains entitled to the same amount of benefit from the scheme.

Facts

The employer makes superannuation contributions to a superannuation scheme for the benefit of its employees.

The scheme is a defined benefit superannuation scheme within the meaning of subsection 6A(1) of the SGAA.

The members of the scheme are defined benefit members within the meaning of subsection 6(1) of the SGAA.

There are a number of provisions available under the trust deed of the defined benefit scheme which can be used to change the amounts of the benefits payable to a member of the scheme in certain circumstances.

However, there are no provisions in the trust deed which result in the benefits of members being altered as a direct result of an employee choosing another fund as their chosen fund.

Reasons for Decision

The choice of superannuation fund requirements, which form part of the SGAA, are effective from 1 July 2005. Section 32C of the SGAA details the types of contributions that will satisfy the requirements. Subsection 32C(1) ensures contributions satisfy the requirements if they are made by an employer to a 'chosen fund' of the employee.

Subsection 32F(1) of the SGAA states that if an employee wants a fund to be their chosen fund, the employee must give the employer written notice to that effect. However, subsection 32F(3) states that a fund (the selected fund ) cannot become a chosen fund for the employee under section 32F if:

(a)

immediately before the employee gave the notice to the employer, the employee was a defined benefit member of a defined benefit superannuation scheme; and

(b)

even if the selected fund were to become a chosen fund for the employee, the employee would be entitled, on the employee's retirement, resignation or retrenchment, to the same amount of benefit from the defined benefit superannuation scheme as the employee would be entitled if the selected fund were not a chosen fund for the employee.

According to the Explanatory Memorandum that accompanied the Bill which inserted the choice of fund requirements into the SGAA, the purpose of subsection 32F(3) is to ensure that an employer will not have to make contributions to a fund chosen by the employee while also being required to finance that employee's right to receive a full retirement, retrenchment or resignation benefit from the defined benefit fund.

In this case, as none of the powers under the trust deed of the scheme are exercised as a result of the member making a choice, and the member remains entitled to the same amount of benefit from the scheme, subsection 32F(3) will apply and the selected fund cannot become a chosen fund of the member.

Year of income:  Year ended 30 June 2005

Legislative References:
Superannuation Guarantee (Administration) Act 1992
   subsection 6(1)
   subsection 6A(1)
   section 32C
   subsection 32C(1)
   subsection 32F(1)
   subsection 32F(3)

Keywords
Defined benefit superannuation funds
Superannuation guarantee charge

Siebel/TDMS Reference Number:  455379; 1-5TRIEIK; 1-HS38QM7

Business Line:  Superannuation

Date of publication:  20 May 2005
Date reviewed:  27 August 2014

ISSN: 1445-2782