Edited version of private ruling

Authorisation Number: 1011485252227

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Ruling

Subject: Personal superannuation contributions - validity of 'Notice to vary'

Question

Is a notice to vary the amount of a contribution provided to the trustee of a superannuation fund (a successor superannuation fund) under section 290-180 of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of contributions made by a person to a predecessor superannuation fund a valid notice?

Answer

No.

This ruling applies for the following period

1 July 2007 to 30 June 2010

The scheme commenced on

1 July 2007

Relevant facts

On the relevant date in 200X a member sent to their superannuation fund (the predecessor fund) a notice of intent to claim a deduction for personal superannuation contributions in accordance with section 290-170 of the ITAA 1997.

This notice of intent to claim a deduction for the year ended 30 June 200X was received by the predecessor fund in 200X and was duly acknowledged.

Later a successor fund merged with the predecessor fund by way of a successor fund transfer and the members of the predecessor fund (including the above mentioned member) were transferred to the successor fund along with their accumulated benefits.

Later in 200Y the member sought advice from the Tax Office about lodging a notice to vary the contributions she had made to the predecessor fund.

After that call the member submitted to the successor fund a notice seeking to vary the contributions she had made to the predecessor fund in accordance with section 290-180 of the ITAA 1997.

This variation notice was received by the successor fund in late 200Y however the successor fund treated the notice as 'invalid' and did not process or act upon the notice because it related to contributions made to the predecessor fund.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 290-180

Income Tax Assessment Act 1997 Section 290-170

Reasons for decision

Summary

The notice to vary is not valid for 2 reasons:

- it has been given to the trustee of the successor fund and not to the trustee of the fund where the contributions were paid (i.e. the predecessor fund); and

- the contributor who lodged the notice is no longer a member of the predecessor fund where the contributions subject to the notice were paid.

Detailed reasoning

A person can claim a deduction for personal contributions made to a superannuation fund for the purpose of providing superannuation benefits for themselves under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997). Subdivision 290-C of the ITAA 1997 lists four conditions that must be satisfied for the person to claim an income tax deduction for the contributions.

One of these conditions is the member must have given a valid notice of intent to the superannuation fund or retirement savings account (RSA) provider in the approved form by the required time and have received an acknowledgement from the fund trustee or the RSA provider (section 290-170 of the ITAA 1997). In this case the 'notice of intent to claim a deduction' was lodged correctly and was duly acknowledged so that condition of Subdivision 290-C of the ITAA 1997 was satisfied.

In accordance with section 290-180 of the ITAA 1997 a person can vary a 'notice of intent to claim a deduction' by giving a 'notice to vary' to the trustee in the approved form. However, section 290-180 lists a number of restrictions to lodging a 'notice to vary' as follows:

290-180(2) You can vary a valid notice, but only so as to reduce the amount stated in relation to the contribution (including to nil). You do so by giving notice to the trustee or the *RSA provider in the *approved form.

290-180(3) However, you cannot vary a valid notice after:

(a) if you have lodged your *income tax return for the income year in which the contribution was made on a day before the end of the next income year - the end of that day; or

(b) otherwise - the end of the next income year.

290-180(3A) The variation is not effective if, when you make it:

(a) you were not a member of the fund or the holder of the *RSA; or

(b) the trustee or *RSA provider no longer holds the contribution; or

(c) the trustee or RSA provider has begun to pay a *superannuation income stream based in whole or part on the contribution.

In short, these three subsections place restrictions around:

- the amount of contributions which can be varied {subsection 290-180(2)};

- time limits for lodgment of the variation notice {subsection 290-180(3)}

- whether the contributor is still a member of the fund {paragraph 290-180(3A)(a)}

- where the contributions are now held {paragraph 290-180(3A)(b)}, and

- whether the contributions have been used to commence payment of a pension to the member{paragraph 290-180(3A)(c)}.

For the circumstances of this case, a closer examination of subsection 290-180(2) is required and in particular to the words 'to the trustee'.

A person who is making or has made a contribution to a fund may give a written 'notice of intent' to the trustee of the fund stating the person intends to claim a deduction for the whole or a specified part of the contribution (section 290-170).

The amount covered by the 'notice of intent' may be reduced. A person does this by giving written 'notice to vary' to the trustee of a fund reducing the amount covered by the original 'notice of intent' (section 290-180).

The giving of a 'notice to vary' reduces the amount covered by the original 'notice of intent' and the net amount continues to be covered by the original 'notice of intent'.

Section 290-170 of the ITAA 1997 requires that a 'notice of intent' be given to the trustee of the fund to which the contribution was made.

As the 'notice to vary' given under section 290-180 of the ITAA 1997 applies to the amount covered in the original 'notice of intent' given under section 290-170 of the ITAA 1997, it is also subject to the same requirement. i.e. it must be given to the trustee of the fund to which the 'notice of intent' was lodged and where the contributions were made.

This is because the 'notice to vary' only has relevance to a trustee who received the original 'notice of intent' under section 290-170 of the ITAA 1997. The successor fund is not the fund which received the contributions or the original 'notice of intent' therefore, in accordance with subsection 290-180(2), the notice lodged by the member is not valid as it has not be given to the correct trustee.

In addition, a person ceases to be a member of a predecessor fund once they have been transferred to a successor fund. Of relevance to the circumstances of this case is subsection 290-180(3A) of the ITAA 1997 which states:

The variation is not effective if, when you make it:

(a) you were not a member of the fund or the holder of the *RSA;

Although the wording of the subsection is clear that to lodge a valid 'notice to vary' the person needs to be a member, the Explanatory Memorandum for Superannuation Legislation Amendment (Simplification) Act 2007 (15 of 2007) which accompanied the introduction of subsection 290-180(3A) adds:

1.10 An individual who wishes to claim a tax deduction for their superannuation contributions is required to notify the trustee or retirement savings account (RSA) provider in writing. Section 290-180* of the ITAA 1997 provides that this notice may be varied in certain circumstances. This amendment provides that a request to vary a notice is not effective if the person is no longer a member of the fund or holder of the RSA, the provider is no longer the holder of the contribution, or a pension has begun to be paid which includes the contribution covered by the request to vary the notice. This is consistent with the circumstances required for the original notice to be valid

The legislation and Explanatory Memorandum both make it clear that a valid 'notice to vary' can only be lodged by a member of the fund. As this member is a member of the successor fund and not the predecessor fund she cannot lodge a valid 'notice to vary' with the successor fund.

The member advised they contacted the Tax Office in the relevant month in 200Y seeking advice about lodging a notice to vary the contributions they had made to the predecessor fund. The ATO records for the call are of no assistance in this matter.

In conclusion, the 'notice to vary' is not valid for 2 reasons:

- it has been given to the trustee of the successor fund and not to the trustee of fund where the contributions were paid; and

- the contributor who lodged the notice is no longer a member of the fund where the contributions subject to the notice were paid.