ATO Interpretative Decision

ATO ID 2005/209 (Withdrawn)

Superannuation

Market linked income stream: relevant number
FOI status: may be released

This ATO ID is withdrawn as it does not reflect the amendments made to section 27H of the Income Tax assessment Act 1936 (ITAA 1936). Section 27H of the ITAA 1936 has been amended for the 2007-08 income year and later income years. This ATO ID.

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

Status of this decision: Decision Withdrawn 16 April 2010

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

How is the 'relevant number' determined in relation to a market linked income stream (MLIS)?

Decision

The 'relevant number' in relation to a MLIS is determined by reference to paragraph (a) of the definition in subsection 27H(4) of the Income Tax Assessment Act 1936 (ITAA 1936).

Facts

The taxpayer is a member of a regulated superannuation fund.

The taxpayer is seriously contemplating the commencement of a MLIS.

Reasons for Decision

Section 27H of the ITAA 1936 sets out how to calculate the annual deductible amount of an income stream. The deductible amount is calculated in the usual manner under section 27H. In order to calculate this amount the 'relevant number' must be determined.

In subsection 27H(4) of the ITAA 1936, 'relevant number' means

(a): where the annuity is payable for a term of years certain - the number of years in the term
(b): where the annuity is payable during the lifetime of a person and not thereafter - the life expectation factor of the person, and
(c): in any other case - the number that the Commissioner considers appropriate having regard to the number of years in the total period during which the annuity will be, or may reasonably be expected to be payable.

A MLIS must be for 'a term of years certain' and so paragraph 27H(4)(a) of the ITAA 1936 must be applied in determining the 'relevant number'. There are a number of options in relation to the choice of term, but the number of years in the term must be chosen prior to the commencement of the MLIS.

If the term of the income stream is based on the primary beneficiary's life expectancy, the term is equal to the primary beneficiary's life expectancy on the commencement day of the income stream, rounded up to the next whole number.

The term may also be based on the primary beneficiary's life expectancy on the commencement day calculated as if they were one, two, three, four or five years younger, rounded up to the next whole number.

If the term of the income stream is based on the reversionary beneficiary's life expectancy, the term is equal to the reversionary beneficiary's life expectancy on the commencement day of the income stream, rounded up to the next whole number.

The term may also be based on the reversionary beneficiary's life expectancy on the commencement day calculated as if they were one, two, three, four or five years younger, rounded up to the next whole number.

Once the term of the income stream is chosen, that term expressed as a number of years becomes the 'term of years certain'. The relevant number for a MLIS is therefore determined by reference to paragraph (a) of the definition in subsection 27H(4) of the ITAA 1936.

Date of decision: 5 April 2005

Year of income: Year ended 30 June 2005

Legislative References:
Income Tax Assessment Act 1936
subsection 27H(4)

Superannuation Industry (Supervision) Regulations 1994
subregulation 1.06(8)

Related ATO Interpretative Decisions
ATO ID 2003/60

Keywords
Annuities & superannuation pensions
Deductible amount
Market linked income stream
Superannuation

Business Line: Superannuation

Date of publication: 15 July 2005

ISSN: 1445-2782

history

	Date:	Version:
	5 April 2005	Original statement
You are here →	16 April 2010	Archived

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