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Ruling

Subject: Superannuation guarantee charge payments

Issue 2

Questions

1. Will the recovered amounts of unpaid superannuation contributions be declared as assessable income in the income year in which they are received?

2. Will the recovered amounts of unpaid superannuation contributions count towards the concessional contributions cap?

3. Are the recovered amounts of unpaid superannuation contributions classified as undeducted contributions?

Advice/Answers

1. Yes.

2. Yes.

3. No.

This ruling applies for the following period

Year ending 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

You are the trustee of superannuation fund (the Fund).

You are also a member of the Fund.

The Fund recently received cheques from the Australian Taxation Office for recovered amounts of unpaid superannuation from your employer.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 27A(1)

Income Tax Assessment Act 1997 Section 292-20

Income Tax Assessment Act 1997 Section 292-25

Superannuation Industry (Supervision) Regulations 1994 Subregulation 6.01(6)

Superannuation Guarantee (Administration) Act 1992 Section 65

Reasons for decision

Summary of decision

The recovered amounts of unpaid superannuation contributions are declared as assessable income in the income year in which they are received.

The recovered amounts of unpaid superannuation contributions count towards the concessional contributions cap.

The recovered amounts of unpaid superannuation contributions do not classify as undeducted contributions.

Detailed reasoning

Section 295-160 of the Income Tax Assessment Act 1997 (ITAA 1997) outlines what contributions and payments are included in the assessable income of a superannuation entity. Section 295-160 states:

The assessable income of an entity includes contributions or payments as set out in this table for the income year in which the contributions or payments are received.

Contributions and payments included in assessable income

Item

Assessable income of this entity:

Includes:

1

CSF
N-CSF that is an *Australian superannuation fund for the income year
*RSA provider

Contribution to provide *superannuation benefits for someone else (except a contribution that is a *roll-over superannuation benefit)

2

N-CSF that is a *foreign superannuation fund for the income year

Contribution to provide *superannuation benefits for someone else to the extent that it relates to a period when that person was:

(a) an Australian resident; or

(b) a foreign resident who *derives *withholding payments covered by subsection 900-12(3)

(except a contribution that is a *roll-over superannuation benefit)

3

CSF
CADF
*RSA provider

Payment under section 65 of the Superannuation Guarantee (Administration) Act 1992

4

CSF
*RSA provider

Payment under section 61 or 61A of the Small Superannuation Accounts Act 1995

In this case, item 3 of the table in section 295-160 of the ITAA 1997 which refers to section 65 of the SGAA relating to payment of shortfall component is of relevance.

The payments represent unpaid superannuation contributions from your employer. As the payments are made in accordance with section 65 of the SGAA, it is a contribution included in assessable income of the superannuation fund. The payment is included in the Fund's assessable income for the income year in which they are received.

Section 292-25 of the ITAA 1997 sets out the amount of concessional contributions for an income year. Section 292-25 states:

(1) The amount of your concessional contributions for a *financial year is the sum of:

(a) each contribution covered under subsection (2); and

(b) each amount covered under subsection (3).

(2) A contribution is covered under this subsection if:

(a) it is made in the *financial year to a *complying superannuation plan in respect of you; and

(b) it is included in the assessable income of the *superannuation provider in relation to the plan, or, by way of a *roll-over superannuation benefit, in the assessable income of a *complying superannuation fund or *RSA provider in the circumstances mentioned in subsection 290-170(5) (about successor funds); and

(c) it is not any of the following:

(i) an amount mentioned in subsection 295-200(2);

(ii) an amount mentioned in item 2 of the table in subsection 295-190(1);

(iii) a contribution made to a *constitutionally protected fund.

(3) An amount in a *complying superannuation plan is covered under this subsection if it is allocated by the *superannuation provider in relation to the plan for you for the year in accordance with conditions specified in the regulations.

(4) Disregard Subdivision 295-D for the purposes of paragraph (2)(b).

In this case the payments are concessional contributions under section 292-25 of the ITAA 1997 as it is a payment made to the Fund in respect of you, is included in the assessable income of the Fund and is not a payment that is excluded from being a concessional contribution.

As the payments are concessional contributions, they will count towards your concessional contributions cap in accordance with section 292-20 of the ITAA 1997.

Subregulation 6.01(6) of the Superannuation Industry (Supervision) Regulations 1994 sets out the meaning of undeducted contributions and states:

Amounts to the credit of a member (except eligible spouse contributions) in a fund are undeducted contributions if:

(a) the amounts are undeducted contributions within the meaning that was given, before 1 July 2007, by subsection 27A(1) of the Tax Act; or

(b) for any other amounts - the amounts comprise member contributions:

(i) made after 30 June 1983 in order to obtain superannuation benefits (within the meaning of the Tax Act); and

(ii) in respect of which no deduction is allowable or has been allowed to the member under the former section 82AAT of the Tax Act.

In this case, it is considered that the two payments are not undeducted contributions as they do not represent an eligible termination payment and thus do not satisfy the meaning that was given by former subsection 27A(1) of the Income Tax Assessment Act 1936. Further, the payments do not comprise member contributions.

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