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Edited version of your written advice
Authorisation Number: 1012725725320
Ruling
Subject: Non-commercial losses
Question
Under subsection 35-10(2E) of the Income Tax Assessment Act 1997 (ITAA 1997) should a superannuation lump sum payment be included in the calculation of taxable income for the purposes of the income requirement?
Answer
Yes.
This ruling applies for the following period:
Year ending 30 June 2014
The scheme commenced on
1 July 2013
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You received a lump sum superannuation payment during the 2013-14 financial year which was shown as a taxed element under the taxable component on your payment summary.
If a person's date of birth is before 1 July 1960 their preservation age is 55 years.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 35-10(2E)
Income Tax Assessment Act 1997 section 301-20
Reasons for decision
For the 2009-10 and later financial years, Division 35 of the ITAA 1997 will apply to defer a non-commercial loss from a business activity unless:
• you meet the income requirement and you pass one of the four tests
• the exceptions apply
• the Commissioner exercises his discretion.
You satisfy the income requirement of subsection 35-10(2E) of the ITAA 1997 if the sum of the following is less than $250,000:
• your taxable income for that year;
• your reportable fringe benefits total for that year;
• your reportable superannuation contributions for that year;
• your total net investment losses for that year.
The tax equation determines that taxable income is:
• assessable income less deductions
• assessable income consists of ordinary income plus statutory income
• ordinary income includes all income received inside and outside Australia.
Section 301-20 of the ITAA 1997 explains that a superannuation lump sum has a taxable component taxed at 0% up to low rate cap amount and 15% on the remainder.
Subsection 301-20(1) of the ITAA 1997 states that if you are under 60 years but have reached your perseveration age when you receive a superannuation lump sum, the taxable component of the lump sum is assessable income.
Therefore although the rate of income tax payable on the lump sum will not exceed 0% the amount is considered to be assessable income.
In your circumstances you have received a taxed element lump sum payment in the 2013-14 financial year. At that time you were under 60 years and had reached your preservation age. In accordance with subsection 301-20(1) of the ITAA 1997 the lump sum you received is considered to be assessable income and is included for the purposes of the income requirement of subsection 35-10(2E) of the ITAA 1997.
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