Edited version of private ruling

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Ruling

Subject: Taxation of superannuation interest - splitting order

Is the amount transferred into a superannuation fund for the taxpayer, as a result of a Family Court splitting order, included in the taxpayer's assessable income?

No.

This ruling applies for the following period

For the year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts

As part of a divorce settlement, you and your ex-spouse agreed to an amount being transferred from your ex-spouse's superannuation account with Fund A to your account with Fund B with the same superannuation provider.

An order was made by the Family Court under the Family Law Act 1975 (FLA) to split your ex-spouse's superannuation interest with Fund A.

The Family Court Order at clause 5 states:

That the court allocate pursuant to Section 90MT(4) of the Family Law Act 1975, a base amount of [a specified amount] to [you] out of [your spouse's] interest in [Fund A].

A roll-over benefits statement shows a specified amount was made from your ex-spouse's superannuation account with Fund A to your account with Fund B, in late 2009. The preserved amount is shown as a taxable component - element taxed in the fund.

In a letter dated late 2009, a company on behalf of Fund A confirmed the specified amount was transferred from your ex-spouse's account with Fund A to your account with Fund B, being the value of your entitlement under the payment split.

Relevant legislative provisions

Income Tax Assessment Act 1997 Part 3-30.

Income Tax Assessment Act 1997 Section 290-5.

Income Tax Assessment Act 1997 Subsection 292-85(2).

Income Tax Assessment Act 1997 Section 306-5.

Income Tax Assessment Act 1997 Section 306-10.

Income Tax Assessment Act 1997 Section 307-5.

Income Tax Assessment Act 1997 Subsection 307-5(1).

Income Tax Assessment Act 1997 Subsection 307-5(5).

Income Tax Assessment Act 1997 Subsection 307-5(6).

Income Tax Assessment Act 1997 Subsection 307-5(7).

Income Tax Assessment Act 1997 Subsection 307-5(8).

Family Law Act 1975 Part VIIIB.

Family Law Act 1975 Subsection 90MT(4).

Family Law (Superannuation) Regulations 2001.

Reasons for decision

Summary

As the payment is a roll-over of a superannuation benefit made under a Family Court splitting order to your superannuation fund it is not included in your assessable income for the 2009-10 income year.

Detailed reasoning

Section 306-5 of the Income Tax Assessment Act 1997 (ITAA 1997) states:

A *roll-over superannuation benefit that you are taken to receive under section 307-15 is not assessable income and is not *exempt income.

Note:

Roll-over superannuation benefits are paid into a complying superannuation plan or are used to purchase a superannuation annuity on your behalf. However, you are taken to receive the benefit under subsection 307-15(1).

The term 'roll-over superannuation benefit' is defined under section 306-10 of the ITAA 1997 as follows:

A *superannuation benefit is a roll-over superannuation benefit if:

(a) the benefit is a *superannuation lump sum and a *superannuation member benefit; and

(b) the benefit is not a superannuation benefit of a kind specified in the regulations; and

(c) the benefit satisfies any of the following conditions:

(i) it is paid from a *complying superannuation plan;

(ii) it is an *unclaimed money payment;

(iii) it arises from the commutation of a *superannuation annuity; and

(d) the benefit satisfies any of the following conditions:

(i) it is paid to a complying superannuation plan;

(ii) it is paid to an entity to purchase a superannuation annuity from the entity.

Note 1:

A superannuation benefit may be paid from one superannuation plan of a superannuation provider to another superannuation plan of the same provider.

Note 2:

For the treatment of amounts transferred within a superannuation plan, see subsection 307-5(8).

Therefore if the payment is a roll-over superannuation benefit it is not included in your assessable income. It is only when you take the superannuation benefit as either a lump sum or as an income stream that tax may be payable.

Family law superannuation payment

Section 307-5 of the ITAA 1997 defines what is a superannuation benefit. A superannuation benefit is a payment described in the table contained in subsection 307-5(1) and will either be a superannuation member benefit or a superannuation death benefit.

Item 1, column 2 of the table contained in subsection 307-5(1) of the ITAA 1997 defines a 'superannuation member benefit' as being:

A payment to you from a superannuation fund because you are a fund member.

Subsection 307-5(5) of the ITAA 1997 states:

Subsection (6) applies if a contribution-splitting superannuation benefit or a family law superannuation payment is paid to you because another person is a member of a superannuation fund, holder of an RSA or depositor with an approved deposit fund, or the annuitant under a superannuation annuity.

Subsection 307-5(6) of the ITAA 1997 deems that in the case of a contributions splitting benefit or a family law superannuation payment, such payments will not be a superannuation benefit to the spouse originally entitled to the superannuation but rather will be a superannuation benefit for the receiving spouse.

A 'family law superannuation payment' is defined in subsection 307-5(7) of the ITAA 1997 as a payment that:

(a) is a payment of any of the following kinds:

(i) a payment in accordance with Part VIIIB of the Family Law Act 1975;

(ii) a payment in accordance with the Family Law (Superannuation) Regulations 2001;

(iii) a payment in accordance with Part 7A of the Superannuation Industry (Supervision) Regulations 1994;

(iv) a payment in accordance with Part 4A of the Retirement Savings Accounts Regulations 1997;

(v) a payment specified in the regulations; and

(b) satisfies the requirements (if any) specified in the regulations.

Subsection 307-5(8) of the ITAA 1997 refers to amounts transferred and states:

If an amount is transferred from one superannuation interest in a superannuation plan to another superannuation interest in the same plan, treat the transfer as a payment in determining whether the transfer of the amount is a superannuation benefit or roll-over superannuation benefit.

In accordance with Part VIIIB of the FLA, a court may make a splitting order in relation to a superannuation interest. A splitting order must be in accordance with section 90MT of the FLA and will specify an amount of percentage of each splittable payment to be paid to a non-member spouse in accordance with the relevant regulations in the Family Law (Superannuation) Regulations 2001 (FLSR 2001).

In this case, the information and documentation provided identifies the roll-over payment as a family law superannuation payment as the payment is being made under the FLA to split your ex-spouse's superannuation interest with Fund A and roll-over the specified amount to your superannuation account in Fund B with the same superannuation provider.

The Family Court Order made under the FLA at clause 5 states:

That the court allocate pursuant to Section 90MT(4) of the Family Law Act 1975, a base amount of [a specified amount] to [you] out of [your ex-spouse's] interest in Fund A.

The roll-over benefits statement shows the specified amount was made from your ex-spouse's membership with Fund A to your account with Fund B, in late 2009. The benefit is a preserved amount and shown as a taxable component - element taxed in the fund.

Accordingly, the payment made to your superannuation fund is a family law superannuation payment under subsection 307-5(7) of the ITAA 1997.

Limits on concessional (before tax) contributions

From 1 July 2007, concessional contributions made to superannuation funds are subject to an annual cap. For the 2009-10 income year, as a result of changes announced in the May 2009 Budget, the annual cap is $50,000 for a person 50 years of age or more on 30 June 2010.

A concessional contribution is a contribution that is made by or for you to a complying super fund and is assessable income of the fund. Concessional contributions include employer contributions and personal contributions claimed as a tax deduction by a self-employed person.

If a person has more than one superannuation fund, all concessional contributions made to all their funds are added together and count towards the cap.

Amounts in excess of the concessional contributions cap are also counted towards the non-concessional contributions cap.

A roll-over payment is not a concessional contribution as you cannot claim a tax deduction in respect of the payment (section 290-5 of the ITAA 1997). Therefore, the payment is not counted towards your concessional contributions cap for the 2009-10 income year.

Non-concessional (after tax) contributions

From 1 July 2007, non-concessional contributions made to a complying superannuation fund will be subject to an annual cap (subsection 292-85(2) of the ITAA 1997). The annual cap is always three times the concessional contributions cap. For the 2009-10 income year the non-concessional contributions cap is $150,000.

Non-concessional contributions you make to a super fund are not included in the fund's assessable income. Non-concessional contributions include:

· personal contributions for which an income tax deduction is not claimed

· contributions a person's spouse makes to their superannuation fund account, and

· transfers from foreign superannuation funds (excluding amounts included in the fund's assessable income).

Some contributions are specifically excluded from being non-concessional contributions. These include:

· a Government co-contribution

· a contribution arising from a structured settlement or an order for personal injury

· a contribution relating to some capital gains tax (CGT) small business concessions to the extent that it does not exceed the CGT cap amount ($1,000,000 indexed annually) when it is made, and

· a roll-over superannuation benefit.

As noted above, the payment made from your ex-spouse's membership with Fund A to your account in Fund B with the same superannuation provider is a roll-over superannuation benefit. Therefore, the payment is excluded from being a non-concessional contribution and is not counted towards the non-concessional cap.