Edited version of private ruling

Authorisation Number: 1011666225300

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Ruling

Subject: Concessional contributions cap

Question

Is the amount of splittable contributions made by your spouse to a superannuation fund in the 2009-10 income year and transferred to your superannuation fund in the 2010-11 income year included in either you or your spouse's concessional contributions cap in the 2010-11 income year under 292-20 of the Income Tax (Transitional Provisions) Act 1997?

Answer No.

Provided your spouse splits the lesser of 85% of the splittable contributions for the 2010-11 income year and the concessional contributions cap for the 2010-11 income year.

This ruling applies for the following periods:

2010-11 income year

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You and your spouse are both members of a Fund (Fund A).

Your spouse is a member of Fund A and another superannuation fund (Fund B).

Fund A and Fund B are complying superannuation funds.

Fund A and Fund B are not SMSFs.

During the 2009-10 income year your spouse made gross contributions of an amount through salary sacrifice to Fund A.

To date there has been no contributions split.

Your spouse proposes to split 85% of your spouse's 2009-2010 Fund A concessional contributions to your Fund A during the 2010-11 income year.

You are over 55 years of age.

Your spouse is under 55 years of age.

Relevant legislative provisions

Section 292-15 of the Income Tax Assessment Act 1997

Section 292-25 of the Income Tax Assessment Act 1997

Subsection 292-25(2) of the Income Tax Assessment Act 1997

Paragraph 292-25(2)(a) of the Income Tax Assessment Act 1997

Paragraph 292-25(2)(b) of the Income Tax Assessment Act 1997

Paragraph 292-25(2)(c) of the Income Tax Assessment Act 1997

Subsection 292-20(1) of the Income Tax Assessment Act 1997

Subsection 292-20(2) of the Income Tax Assessment Act 1997

Section 295-155 of the Income Tax Assessment Act 1997

Regulation 1.03 of Superannuation Industry (Supervision) Regulations 1994

Subregulation 1.03(1) of Superannuation Industry (Supervision) Regulations 1994

Subregulation 5.01(1) of Superannuation Industry (Supervision) Regulations 1994

Regulation 6.40 of Superannuation Industry (Supervision) Regulations 1994

Regulation 6.42 of the Superannuation Industry Supervision Regulations

Regulation 6.41 of the Superannuation Industry Supervision Regulations

Regulation 6.44(1) of the Superannuation Industry Supervision Regulations

Paragraph 6.44(1)(a) of the Superannuation Industry Supervision Regulations

Paragraph 6.44(1)(b) of the Superannuation Industry Supervision Regulations

Section 292-20 of the Income Tax (Transitional Provisions) Act 1997

Paragraphs 292-20(2)(c) of the Income Tax (Transitional Provisions) Act 1997

Paragraphs 292-20(2)(d) of the Income Tax (Transitional Provisions) Act 1997

Summary

No amount of splittable contributions made by your spouse to a superannuation fund in the 2009-10 income year and transferred to your superannuation fund in the 2010-11 income year will be included in either you or your spouse's concessional contributions cap in the 2010-11 income year under 292-20 of the Income Tax (Transitional Provisions) Act 1997. However, your spouse can only split the lesser of 85% of the splittable contributions for the 2010-11 income year and the concessional contributions cap for the 2010-11 income year.

Detailed reasoning

Paragraphs 292-25(2)(a) and (b) of the Income Tax Assessment Act 1997 (ITAA 1997) stipulate that a contribution is a concessional contribution for a financial year, if it is made in the financial year to a complying superannuation plan in respect of an individual, and it is included in the assessable income of the superannuation provider in relation to the plan. Such contributions include contributions made by an employer for an employee, including salary sacrifice contributions.

If a taxpayer is aged 50 years or over on the last day of a relevant financial year, section 292-20 of the Income Tax (Transitional Provisions) Act 1997 (ITTPA 1997) will apply. Subsequently, the concessional contributions cap for those taxpayers, for the 2009-10 and 2010-11 income years is $50,000, as per paragraphs 292-20(2)(c) and (d) of the ITTPA 1997.

Regulation 1.03 of Superannuation Industry (Supervision) Regulations 1994 (SISR) is the SISR interpretation provision. Subregulation 1.03(1) of SISR provides that for SISR purposes and unless the contrary intention appears, the terms listed have the meaning given by subregulation 1.03(1). Accordingly, for SISR purposes, the term 'contributions' in relation to a fund, includes payments of shortfall components to the fund and payments to the fund from the Superannuation.

Holding Accounts Special Account but does not include benefits that have been rolled over or transferred to the fund. In applying that definition, the Commissioner takes rolled over and transferred to have the meanings given to those terms in subregulation 5.01(1) of SISR and therefore takes 'rolled over' and 'transferred' to be concerned only with amounts moved within the Australian superannuation system.

Subdivision 295-C of the ITAA 1997 specifies the contributions included as assessable contributions for the purposes of taxation of a superannuation entity. Specifically, section 295-155 of ITAA 1997 determines that there are basically 3 types of assessable contributions:

(a) those made by a contributor (for example, an employer) on behalf of someone else (for example, an employee); and

(b) those made on the contributor's own behalf for which the contributor is entitled to a deduction; and

(c) those transferred from a foreign superannuation fund to an Australian superannuation fund.

The payment standards in SISR prescribe that a member of a regulated superannuation fund may, in a financial year, apply to the trustee of a fund to roll over, transfer or allot an amount of benefits, for the benefit of the member's spouse, that is equal to an amount of the splittable contributions made to that fund by, for, or on behalf of the member in the last financial year that ended before the application, or the financial year in which the application is made - where the member's entire benefit is to be rolled over, transferred or cashed in that year (as per paragraphs 6.44(1)(a) and (b) of SISR). The term 'allot' is defined in subregulation 1.03(1) of SISR for Division 6.7 (spouse contributions-splitting amounts) purposes. It should be noted that subregulation 1.03(1) defines 'allot' as meaning to credit an amount from a member's account to another account in the regulated superannuation fund held by, or created for, the receiving spouse other than by transfer or roll-over.

A contribution which is to be split between a member of a fund and their spouse is called a splittable contribution (as per regulation 6.40 of SISR). Further, a splittable contribution is a contribution to a regulated superannuation fund on or after 1 January 2006 (subregulation 6.42(1) of SISR).

Taxed splittable contributions are prescribed under subregulation 6.41(1) of SISR as contributions which will be included in the assessable income of an entity and are a taxable contribution for the purposes of Subdivision 295-C of the ITAA 1997.

A member of a super fund is only permitted to split the lesser of the following:

· 85% of the concessional contributions for that financial year; and

· the concessional contributions cap for that financial year.

The amount determined above, is the maximum splittable amount of taxed splittable contributions for that financial year, as per regulation 6.40 of SISR.

When determining whether an amount will count towards an individual's concessional contributions cap for a financial year, we must first be able to identify the amount of concessional contributions for a financial year. This is determined under section 292-25 of the ITAA 1997. Importantly, paragraph 292-25(1)(a) and subsection 292-25(2) of the ITAA 1997 both highlight what is a 'contribution' for these purposes. Subsection 292-25(2) of the ITAA 1997 specifically refers to whether a 'contribution' is covered under this subsection subject to specific provisions in paragraphs 292-25(2)(a), (b) and (c) of the ITAA 1997. The relevant terminology here is the use of the wording 'contribution'.

Further to the above, section 292-15 of the ITAA 1997 stipulates that an individual is liable to pay excess concessional contributions tax if they have excess concessional contributions for a financial year. Notably, again the relevant terminology here is 'contribution' for these purposes.

As mentioned above, subregulation 1.03(1) of SISR specifically excludes benefits that have been rolled over or transferred to a fund from being 'contributions' in relation to the fund.

Division 6.7 of the SISR (spouse contributions-splitting amounts), dictates under subregulation 6.44(1) of SISR that the benefit (a taxed splittable contribution in this case) referred to for the purposes of contributions-splitting is applied for by the member requesting to roll over, transfer or allot an amount of benefits, for the benefit of the member's spouse.

Effectively, a spouse contributions-splitting amount that is transferred or rolled over to a fund, is not classed as a 'contribution' and subsequently is not counted towards the concessional contributions cap of the member's spouse once it has been split to them.

The member must apply to the fund to have this amount rolled over, transferred or allotted to their spouse.

From the facts of the case your spouse has salary sacrificed an amount as superannuation contributions to Fund A, a superannuation fund, during the 2009-10 income year. Under section 295-155 of the ITAA 1997, these contributions are considered to be concessional contributions.

From the legislative discussion above, your spouse can split the superannuation contributions made in the 2009-10 income year with you in the 2010-2011 income year. Your spouse can split an amount of up to 85% of those contributions by transferring an amount of benefits for you to Fund A in the 2010-11 income year. A spouse contributions-splitting amount that is transferred or rolled over to a fund, is not classed as a 'contribution' and subsequently is not counted towards the concessional contributions cap for either you or your spouse in the 2010-11 income year.

Your spouse must apply to the fund to have the contributions splitting amount rolled over, transferred or allotted to you. It will therefore not be counted as a 'contribution' and will not count towards your concessional contributions cap.

There is no effect to your spouse's concessional contributions cap for the 2010-11 income year, as the full amount, prior to any split, has previously been counted towards your spouse's concessional contributions cap for the 2009-10 income year.