Income Tax Assessment Act 1997



Division 307 - Key concepts relating to superannuation benefits  

Subdivision 307-C - Components of a superannuation benefit  

SECTION 307-125   Proportioning rule  

The object of this section is to ensure that the *tax free component and *taxable component of a *superannuation benefit are calculated by:

(a) first, determining the proportions of the *value of the *superannuation interest that those components represent; and

(b) next, applying those proportions to the benefit.

The *superannuation benefit is taken to be paid in a way such that each of those components of the benefit bears the same proportion to the amount of the benefit that the corresponding component of the *superannuation interest bears to the *value of the superannuation interest.


The amount of a superannuation lump sum is $100. Just before the benefit is paid, the value of the superannuation interest was $1000 (of which $200 was the tax free component and $800 was the taxable component). For the lump sum, the tax free component is $20 and the taxable component is $80.

For the purposes of subsection (2), determine the *value of the *superannuation interest, and the amount of each of those components of the interest, at whichever of the following times is applicable:

(a) if the *superannuation benefit is a *superannuation income stream benefit - when the relevant *superannuation income stream commenced;

(b) if the superannuation benefit is a *superannuation lump sum - just before the benefit is paid;

(c) despite paragraphs (a) and (b), if the superannuation benefit arises from the commutation of a superannuation income stream:

(i) if subparagraph (ii) does not apply - when the relevant superannuation income stream commenced; or

(ii) if the superannuation income stream is a *deferred superannuation income stream that had not commenced before the time the commutation happened - just before the time the commutation happened;

(d) despite paragraphs (a) and (b), if:

(i) the superannuation benefit is an *involuntary roll-over superannuation benefit paid from a superannuation interest; and

(ii) that interest was supporting a superannuation income stream immediately before that benefit was paid;
when that superannuation income stream commenced.

Subsection (2) does not apply to a *superannuation benefit if any of the following applies:

(a) the regulations specify an alternative method for determining those components of the benefit;

(b) a determination under subsection (5) specifies an alternative method for determining those components of the benefit;

(c) the Commissioner consents in writing to the use of another method for determining those components of the benefit.

If so, use that method to determine those components of the benefit.

For the purposes of paragraph (4)(b), the Commissioner may determine, by legislative instrument, one or more alternative methods for determining those components of a *superannuation benefit.

If the *superannuation benefit is an *unclaimed money payment or a *small superannuation account payment, for the purposes of this section:

(a) treat the benefit as a superannuation benefit paid from a *superannuation interest; and

(b) treat the amount of the benefit as the *value of that superannuation interest just before the time the benefit is paid.


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