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Ruling

Subject: Tax offset for no-TFN contributions income

Question

Can the trustee of a successor fund claim a tax offset under section 295-675 of the Income Tax Assessment Act 1997 (ITAA 1997) for tax payable on 'no-TFN contributions income' by the predecessor fund because the member has since provided their tax file number (TFN) to the successor fund?

Advice/Answers

No.

This ruling applies for the following period

1 July 2007 to 30 June 2010

The scheme commenced on

1 July 2007

Relevant facts

On the relevant date the Commissioner of Taxation advised the predecessor fund by way of a section 299TA notice the tax file number (TFN) provided by a member was incorrect.

Later the predecessor fund removed that member's incorrect TFN from its administrative records.

For the year ended 30 June 2008 the predecessor fund included in its assessable income an amount representing the member's contributions for which no TFN had been quoted. This resulted in an amount being deducted from the member's account.

The successor fund then merged with the predecessor fund by way of a successor fund transfer and the members of the predecessor fund (including the above mentioned member) were transferred to the successor fund along with their accumulated benefits.

Some time later the member provided their correct TFN to the successor fund and requested their member account be re-credited with the amount previously deducted. The successor fund has not acceded to this request.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 295-I

Income Tax Assessment Act 1997 Subdivision 295-J

Income Tax Assessment Act 1997 Section 995-1

Reasons for decision

Summary

Where the member quotes their TFN to the successor fund the trustee of that fund is not entitled to a tax offset under section 295-675 of the ITAA 1997 for tax payable by the original fund (the predecessor fund) on no-TFN contributions income.

Detailed reasoning

The member's contributions to the predecessor fund for the year ended 30 June 2008 were included in the income of the predecessor fund as 'no-TFN contributions income' and were taxed in accordance with section 295-610 of the ITAA 1997.

Subdivision 295-J of the ITAA 1997 allows a superannuation fund to claim a tax offset for tax payable on an amount of no-TFN contributions income where certain conditions are met.

Subsection 295-675(1) of the ITAA 1997 states the fund is entitled to a tax offset for the income years commencing on or after 1 July 2007 for amounts of tax that count toward the offset for the fund.

Section 295-680 of the ITAA 1997 provides that the amount of the tax offset is the total of each amount determined under subsection 295-675(2) of the ITAA 1997 for the current year.

Subsection 295-675(2) of the ITAA 1997 states:

Paragraphs 295-675(2)(a) and (b) of the ITAA 1997 provide that the tax offset is only available to a fund where tax was payable by the fund on an amount of no-TFN contributions income of that fund.

In this case, the tax payable on the no-TFN contributions income was paid by the trustee of the predecessor fund in relation to the no-TFN contribution income of the predecessor fund. Accordingly, the trustee of the successor fund cannot satisfy paragraphs 295-675(2)(a) and (b) in relation to the tax payable by the trustee of the predecessor fund in relation to this income.

In addition, paragraph 295-675(2)(c) of the ITAA 1997 requires that the amount of no-TFN contributions income was a contribution made to the fund for an individual who has quoted their TFN to that provider for the first time during the current year. In the case of the trustee of the successor fund, the no-TFN contributions income was not a contribution that was made to the successor fund. This means the trustee of the successor fund cannot satisfy paragraph 295-675(2)(c) of the ITAA 1997 as well.

Therefore, the trustee of the successor fund will not be entitled to a tax offset in relation to the tax payable by the trustee of the predecessor fund on no-TFN contributions income of the predecessor fund. As there is no tax offset available for the successor fund in this instance, the member's account cannot be re-credited by this method.

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