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Edited version of your private ruling

Authorisation Number: 1012466436199

Ruling

Subject: Crystallised segment

Questions:

In calculating the crystallised segment of your roll-over superannuation benefit is the relevant period from the date you commenced membership until 30 June 2007?

Advice/Answers:

Yes.

This ruling applies for the following period:

1 July 2013 to 30 June 2014

The scheme commenced on:

1 July 2013

Relevant facts:

You are over 55 years of age.

You are planning your retirement and therefore are seeking clarification regarding the pre-July 83 component to be included in the crystallised segment of your superannuation benefit.

No roll-over has occurred as yet.

Relevant legislative provisions:

Taxation Administration Act 1953 Section 288-105 of Schedule 1

Income Tax Assessment Act 1936 Subsection 27A(1).

Income Tax Assessment Act 1997 Section 307-225

Income Tax Assessment Act 1997 Subsection 307-225(1).

Income Tax Assessment Act 1997 Subsection 307-225(2).

Income Tax Assessment Act 1997 Subsection 307-225(3).

Income Tax Assessment Act 1997 Subsection 307-225(4).

Reasons for decision

Summary

The crystallised segment of your roll-over superannuation benefit is equal to the value of your pre-July 83 component in the superannuation fund just before 1 July 2007.

The post 30 June 1983 days of your crystallised segment are counted only up until 30 June 2007.

Detailed reasoning

The crystallised segment of a superannuation interest is defined in section 307-225 of the ITAA 1997 as follows:

307-225(1) To work out the crystallised segment of a superannuation interest, first assume that:

307-225(2) The crystallised segment of the superannuation interest is so much of the value of the interest as consists of the total of the following components of the eligible termination payment:

307-225(3) For the purposes of paragraph (2)(e), disregard the value of the interest just before 1 July 2007 to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment.

307-225(4) In this section, the following terms have the same meaning as in subsection 27A(1) of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007):

From this section, it can be seen that a superannuation fund is to assume that an eligible termination payment (ETP) had been made in respect of a person just before 1 July 2007 and the amount of the ETP had been equal to the value of the person's interest in the fund at that time.

An ETP paid by a superannuation fund will be an ETP under paragraph (b) of the definition of an ETP in subsection 27A(1) of the Income Tax Assessment Act 1936 (ITAA 1936) which states:

any payment made from a superannuation fund in respect of the taxpayer by reason that the taxpayer is or was a member of the fund...

In regards to the crystallised segment and the pre-July 83 component the explanatory memorandum to the Tax Laws Amendment (Simplified Superannuation) Act 2007 states at paragraphs 2.139 to 2.142:

Therefore, for most superannuation interests, the pre-July 83 component will be calculated as at 30 June 2007. Further, superannuation providers had until 30 June 2008 to calculate the crystallised component under section 288-105 of Schedule 1 of the Taxation Administration Act 1953.

Because, the pre-July 83 component of a person's interest in a superannuation fund is included in the crystallised segment, the post 30 June 1983 days are counted only up until 30 June 2007.

The amount calculated then becomes a fixed amount and forms part of the tax free component. It is the superannuation fund that calculates the crystallised segment.

When a member's benefits are rolled over to another superannuation fund, the tax free component of the roll-over becomes part of the contributions segment of the superannuation interest in the new superannuation fund. The crystallised component is calculated until 30 June 2007 and not until the actual roll-over date.


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