Edited version of administratively binding advice

Authorisation Number: 1011628413135

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Advice

Subject: Excess contributions tax

Question 1

Will personal deductible superannuation contributions to a constitutionally protected fund be included in calculating the taxpayer's excess concessional contributions under section 292-20 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Advice

No.

Question 2

Will personal deductible superannuation contributions to a constitutionally protected fund be included in calculating the taxpayer's excess non-concessional contributions under section 292-85 of the ITAA 1997?

Advice

No.

This ruling applies for the following periods:

year ending 30 June 2011

year ending 30 June 2012

year ending 30 June 2013

Relevant facts and circumstances

The taxpayer is an Australian resident who is a member of a superannuation fund (the fund).

The fund is a 'constitutionally protected superannuation fund'.

The taxpayer wishes to make superannuation contributions to the fund.

Assumptions

The taxpayer will satisfy the maximum earnings as an employee condition under section 290-160 of the ITAA 1997 in each of the relevant income years.

The taxpayer will provide a written notice to the trustee of the fund under section 290-170 of the ITAA 1997 stating that the taxpayer intends to claim a deduction for personal superannuation contributions made in each of the relevant income years.

The trustee of the Fund will provide a written notice under section 290-170 of the ITAA 1997 acknowledging receipt of the notice.

The taxpayer is over the age of 50 and under the age of 65.

Relevant legislative provisions

Reasons for decision

Question 1

Summary

Your personal superannuation contributions to a constitutionally protected fund for which you will claim an income tax deduction will not be included in the calculation of your excess concessional contributions. This is because these contributions do not form part of concessional contributions by virtue of subparagraph 292-25(2)(c)(iii) of the ITAA 1997.

Detailed reasoning

Section 292-20 of the ITAA 1997 states that you have excess concessional contributions for a financial year if the amount of your concessional contributions for the year exceeds your concessional contributions cap for the year.

Concessional contributions

Generally concessional contributions include personal contributions by an eligible person that are allowed as an income tax deduction. 'Concessional contributions' has the meaning given by sections 292-25 and 292-165 of the ITAA 1997. Section 292-165 refers to special rules for defined benefit interests. This information does not apply to a super interest in a constitutionally protected fund.

Subsection 292-25(1) of the ITAA 1997states that the amount of your concessional contributions for a financial year is the sum of each contribution covered under subsection 292-25(2) of the ITAA 1997and each amount covered under subsection 292-25(3) of the ITAA 1997.

A contribution covered under subsection 292-25(2) is a contribution that:

· is made in the financial year to a complying superannuation plan in respect of you, and

· is included in the assessable income of the superannuation provider in relation to the plan.

But, a contribution covered under section 292-25 of the ITAA 1997is not any of the following:

· an amount mentioned in subsection 292-200(2) of the ITAA 1997 - transfers from foreign superannuation funds

· an amount mentioned in item 2 of table in subsection 295-190(1) of the ITAA 1997 - a roll-over superannuation benefit to the extent that it consists of an element untaxed in the fund, and is not an excess untaxed roll-over amount for that individual, and

· a contribution made to a constitutionally protected fund.

In addition, subsection 292-25(3) of the ITAA 1997 includes a contribution that is an amount in a complying superannuation plan if it is allocated by the superannuation provider in relation to the plan for your for the year in accordance with conditions specified in the regulations.

Regulation 292-25.01 of the Income Tax Assessment Regulations 1997 (ITAR 1997) sets out conditions for the purposes of allocating an amount in a complying superannuation plan. Paragraph 292-25.01(3)(c) of the ITAR 1997 states that a contribution made to a constitutionally protected fund is to be treated as not having been allocated by the superannuation provider in a way that is covered by subsection 292-25(3) of the ITAA 1997.

In your case, you want to contribute personal deductible superannuation contributions to a constitutionally protected fund. From the above, contributions to a constitutionally protected fund are excluded from the definition of concessional contributions by virtue of subparagraph 292-25(2)(c)(iii) and paragraph 292-25.01(3)(c) of the ITAR 1997 for the purpose of section 292-25 of the ITAA 1997.

Constitutionally protected fund means a fund that is declared by the regulations to be a constitutionally protected fund. Regulation 995-1.04 of ITAR 1997 states:

For the definition of constitutionally protected fund in subsection 995-1(1) of the ITAA 1997, a fund:

(a) of the kind to which, in the absence of item 5.3 of section 50-25 of the Act, Division 295 of the Act would apply; and

(b) established by:

(i) a State Act mentioned in Schedule 4; or

(ii) a specified provision of a State Act mentioned in Schedule 4;

is a constitutionally protected fund.

As a result, the fund is a superannuation scheme that is a constitutional protected fund as outlined in Schedule 4 to the ITAR 1997.

For the purposes of section 292-25 of the ITAA 1997 (concessional contributions) your personal deductible superannuation contributions are specifically excluded by subparagraph 292-25(2)(c)(iii) and paragraph 292-25.01(3)(c) of the ITAA 1997 as they are contributions made to a constitutionally protected fund.

Concessional contributions cap

Your concessional contributions cap for the financial year ended 30 June 2011 or later financial year is the amount worked out by indexing annually the amount mentioned in paragraph 292-20(2)(c) of the ITAA 1997 - which is $25,000.

If you have excess concessional contributions for a financial year between 1 July 2007 and before 1 July 2012 and you are 50 years or over on the last day of that financial year, your transitional concessional contributions cap for each financial year up to 30 June 2012 is $50,000. The transitional concessional contributions cap is not indexed; section 292-20 of the Income Tax (Transitional Provisions) Act 1997.

You would be over 50 on the last day of each of the financial years ended 30 June 2011 to 2012. As such, you have access to the transitional concessional contributions cap of $50,000 for each of those financial years.

For the financial year ended 30 June 2013 your concessional contributions cap of $25,000 (indexed) applies in your circumstances.

In your case, as you wish to contribute personal superannuation contributions to a constitutionally protected fund for which you will claim an income tax deduction, these contributions will be excluded from calculating your excess concessional contributions. This is because they are contributions made to constitutionally protected fund which do not form part of concessional contributions for the purposes of section 292-20 of the ITAA 1997.

Question 2

Summary

Your personal superannuation contributions to a constitutionally protected fund for which you will claim an income tax deduction will not be included in the calculation of your excess non-concessional contributions to the extent they are not included in the contributions segment of your superannuation interest in the fund.

Detailed reasoning

Section 292-85 of the ITAA 1997 states that you have excess non-concessional contributions for a financial year if the amount of your non-concessional contributions for the year exceeds your non-concessional contributions cap for the year.

Non-concessional contributions

Generally non-concessional contributions include:

· personal contributions by an eligible person which are covered by a valid and acknowledged notice under section 290-170 of the ITAA 1997 that you are not allowed as an income tax deduction; this includes personal contributions made to constitutionally protected funds, and

· contributions in excess of your concessional contributions cap - that is, your excess concessional contributions.

'Non-concessional contributions' has the meaning given by section 292-90 of the ITAA 1997. Subparagraph 292-90(2)(c)(iv) of the ITAA 1997 specifically excludes a contribution made to a constitutionally protected fund (other than a contribution included in the contributions segment of your superannuation interest in the fund).

Contributions segment has the meaning given by section 307-220 of the ITAA 1997. The contributions segment of a superannuation interest is generally the value of the interest that consists of all contributions made after 1 July 2007 that have not been and will not be included in the assessable income of the fund.

Paragraph 307-220(2)(a) of the ITAA 1997 provides that in determining whether contributions are included in the contributions segment, for a plan that is a constitutionally protected fund (CPF) - treat the superannuation plan as if it were not a constitutionally protected fund.

To apply this test would result in any personal contributions covered by a valid and acknowledged notice under section 290-170 of the ITAA 1997 being included in the fund's assessable income; item 1 in the table in subsection 295-190(1) of the ITAA 1997. As a result, contributions made to a constitutionally protected fund that would have been assessable income of the fund if the fund was a taxable super fund, do not form part of non-concessional contributions.

In your case, you wish to contribute personal deductible contributions to the fund which is constitutionally protected fund. These contributions will not form part of your non-concessional contributions, if:

· the contributions to a constitutionally protected fund are not included in the contributions segment of your super interest in the fund, and

· personal contributions you make to a constitutionally protected fund for which you claim an income tax deduction.

Non-concessional contributions cap

Your non-concessional contributions cap for the financial year ended 30 June 2011 or later financial year is the amount that is six times your concessional contributions cap for the year - that is $150,000; subsection 292-85(2) of the ITAA 1997.

Individuals under age 65 in a financial year are able to bring forward future entitlements to two years worth of non-concessional contributions; section 292-85 of the ITAA 1997. This means, generally, that a person under age 65 can contribute non-concessional contributions of up to $450,000 over three financial years, without exceeding their non-concessional contributions cap.

You would be under 65 in each of the financial years ended 30 June 2011 to 2013. As such, you would be able to bring forward future entitlements to two years worth of non-concessional contributions.

In your case, as you wish to contribute personal deductible superannuation contributions to the fund, these contributions will be excluded from calculating your excess non-concessional contributions to the extent they are not included in the contributions segment of your super interest in the fund. These contributions will not count towards your non-concessional contributions cap.