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Edited version of your written advice
Authorisation Number: 1013100990833
Date of advice: 6 October 2016
Ruling
Subject: Interests in Public Sector Superannuation Scheme
Question 1
Should the benefits payable by the ABC Fund be treated as a 'single superannuation interest' for the purposes of section 307-200 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes
Question 2
Can the ABC Fund continue to calculate the valuation of the superannuation interests following the method outlined in subregulation 307-205.02(2) of the Income Tax Assessment Regulations 1997 on the basis that it did not have an existing practice in place to value superannuation interests at 28 June 2007?
Answer
Yes
This ruling applies for the following periods:
X period
The scheme commences on:
DD MM YYYY
Relevant facts and circumstances
1. The ABC Fund is a public sector superannuation scheme.
2. No part of the benefit paid from the ABC Fund is sourced from any other source and no part of the benefit consists of an element untaxed in the fund.
3. The ABC Fund did not have an existing practice in valuing its members' superannuation interest immediately prior to 28 June 2007.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 307-125
Income Tax Assessment Act 1997 section 307-200
Income Tax Assessment Act 1997 section 307-205
Income Tax Assessment Act 1997 section 995-1
Income Tax Assessment Regulations 1997 regulation 307-200.03
Income Tax Assessment Regulations 1997 regulation 307-205.02
Income Tax Assessment Regulations 1997 regulation 307-205.02B
Superannuation Industry (Supervision) Act 1993 section 10
Reasons for decision
Question 1
Should the benefits payable by the ABC Fund be treated as a 'single superannuation interest' for the purposes of section 307-200 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Summary
Yes, the benefits payable by the ABC Fund should be treated as a 'single superannuation interest' for the purposes of section 307-200 of the ITAA 1997.
Detailed reasoning
Regulation 307-200.03 of the Income Tax Assessment Regulations 1997 explains how to treat a 'superannuation interest' in a 'public sector superannuation scheme' as 2 or more superannuation interests. Subregulations 307-200.03(2) and (3) read as follows:
(2) The interest is to be treated as 2 interests if:
(a) the superannuation benefit that is to be paid from the scheme is sourced:
(i) partly from contributions made into the scheme or earnings on those contributions; and
(ii) partly from 1 or more other sources; or
(b) the superannuation benefits that are to be paid from the scheme are sourced:
(i) partly from contributions made into the scheme or earnings on those contributions; and
(ii) partly from 1 or more other sources.
(3) For subregulation (2), the interests are:
(a) an interest that consists of the contributions made into the scheme and the earnings on those contributions; and
(b) an interest that consists of the remainder of the amount sourced from the other source or sources.
No part of the benefit paid from the ABC Fund is sourced from any other source and no part of the benefit consists of an element untaxed in the fund.
As such, all superannuation benefits paid from the ABC Fund contain either, or a combination of, a tax free component or an element taxed in the fund and should be treated as a 'single superannuation interest' for tax purposes.
Question 2
Can the ABC Fund continue to calculate the valuation of the superannuation interests following the method outlined in subregulation 307-205.02(2) of the Income Tax Assessment Regulations 1997 on the basis it did not have an existing practice in place to value superannuation interests at 28 June 2007?
Summary
Yes, the ABC Fund can continue to calculate the valuation of the superannuation interests following the method outlined in subregulation 307-205.02(2) of the Income Tax Assessment Regulations 1997 on the basis that it did not have an existing practice in place to value superannuation interests at 28 June 2007.
Detailed reasoning
The ABC Fund is a public sector superannuation scheme.
Regulation 307-205.02B provides that:
"A superannuation interest in a public sector superannuation scheme is to be valued:
(a) by using the practice for valuing a superannuation interest (other than an interest that supports a superannuation income stream mentioned in subparagraph 307-205.02(1)(a)(i)) that was used by the scheme immediately before 28 June 2007; or
(b) if there was no practice for valuing an interest at that time - by using the method specified in subregulation 307-205.02(2)."
The ABC Fund did not have an existing practice in valuing its members' superannuation interest immediately prior to 28 June 2007.
As there was no practice in place before 28 June 2007 for valuing superannuation interests, the ABC Fund can continue to calculate the valuation of the superannuation interests in accordance with the method outlined in subregulation 307-205.02(2).
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